The oil and gas industry is one of the largest contributors to global carbon emissions. However, decarbonising drilling operations, refining, and transport is now a business imperative as environmental regulations tighten and investors prioritise ESG commitments. The transition to low-carbon operations not only mitigates climate risks but also enhances operational efficiency, reduces costs, and strengthens stakeholder trust.
This guide explores how oil and gas companies can reduce carbon emissions through technology, policy measures, operational efficiencies, and consumer engagement—ultimately paving the way for a sustainable energy future.
Understanding Carbon Emissions in the Oil and Gas Industry
The Role of Oil and Gas in Climate Change
From drilling operations to refining and distribution, the oil and gas industry emits significant amounts of carbon dioxide (CO₂) and methane (CH₄)—the two main greenhouse gases (GHGs) driving climate change. The industry's emissions occur at various stages:
- Upstream (Exploration & Production): Emissions from flaring, venting, and fugitive methane leaks in drilling operations, hydraulic fracturing, and offshore platforms.
- Midstream (Transportation & Storage): Emissions from pipelines, LNG terminals, and crude oil shipping, often linked to gas leaks and energy-intensive refrigeration.
- Downstream (Refining & Distribution): Carbon-heavy refining processes, including catalytic cracking and distillation, contribute to the industry’s high emissions footprint.
Without urgent action, these emissions will continue to escalate as global energy demand grows.
Why Is Methane a Critical Concern?
While CO₂ emissions are the most well-known, methane emissions from drilling operations and pipeline leaks are even more dangerous. Methane has 80 times the warming potential of CO₂ over a 20-year period, making it a high-priority target for emissions reduction.Reducing methane emissions is one of the quickest and most cost-effective ways to mitigate climate change, with solutions like methane leak detection, vapor recovery units (VRUs), and improved wellhead integrity delivering immediate benefits.Strategies for Reducing Carbon EmissionsReducing emissions in oil and gas production requires a combination of technology-driven solutions, regulatory policies, and process optimisation.
1. Low-Carbon Drilling Operations & Production
- Electrification of drilling rigs – Switching from diesel-powered to electric-powered rigs reduces emissions and improves efficiency.
- Advanced wellhead integrity monitoring – Detecting and sealing methane leaks at the source prevents fugitive emissions.
- Carbon capture in offshore platforms – Implementing carbon capture, utilisation, and storage (CCUS) for offshore drilling rigs to trap CO₂ before it enters the atmosphere.
2. Methane Leak Detection & Reduction
- Satellite-based methane monitoring – Companies like Shell and ExxonMobil are using satellites to detect methane leaks across their global operations.
- Flare gas recovery systems – Instead of flaring excess gas, new technologies capture and repurpose the gas, reducing waste and emissions.
- Automated leak detection sensors – AI-powered sensors can instantly detect and alert operators to leaks in pipelines and storage tanks.
3. Carbon Capture, Utilisation, and Storage (CCUS)
- Direct air capture (DAC) – Some refineries and LNG plants are investing in carbon removal technologies to extract CO₂ from the air.
- Enhanced oil recovery (EOR) – CO₂ is injected into reservoirs to enhance oil recovery while permanently storing emissions underground.
- CCUS hubs near refineries – Oil majors like Chevron and BP are developing carbon storage hubs to capture and store emissions from refining facilities.
4. Electrification & Renewable Energy Integration
- Solar-powered oil fields – Some companies are electrifying oil extraction using on-site solar farms instead of diesel generators.
- Wind-powered offshore drilling – Floating wind turbines can supply power to offshore platforms, reducing reliance on gas-fired power generation.
- Battery storage for drilling operations – New energy storage solutions help stabilise power supply and improve grid efficiency.
5. Sustainable Refining & Green Hydrogen
- Green hydrogen for refineries – Many refineries are replacing grey hydrogen (made from natural gas) with green hydrogen (produced with renewables).
- Electrified refining processes – Instead of fossil fuel-based heat, companies are exploring electric steam reforming and plasma-based refining.
- Carbon-neutral synthetic fuels – Synthetic fuels made from captured CO₂ and green hydrogen are emerging as alternatives to traditional gasoline and diesel.
The Role of Policy & Regulation in Decarbonisation
Government Policies Driving Low-Carbon Oil & Gas
- Carbon pricing & emissions trading schemes – Increasingly, countries like Australia, Canada, and the EU impose carbon taxes or cap-and-trade systems to incentivise emissions reduction.
- Methane regulations & leak detection mandates – New methane leak detection requirements are accelerating investments in automated monitoring and flaring reduction.
- Subsidies for CCUS & hydrogen production – Governments are funding carbon storage projects and green hydrogen facilities to accelerate low-carbon transitions.
Industry-Led Initiatives
- Oil & Gas Climate Initiative (OGCI) – A consortium of major oil companies investing in low-carbon technologies.
- Methane Guiding Principles – Global initiative aimed at reducing methane leaks across oil & gas infrastructure.
- Science-Based Targets Initiative (SBTi) – Companies setting validated emissions reduction targets in line with the Paris Agreement.
The Future of Oil & Gas: A Low-Carbon Perspective
What Will a Decarbonised Oil & Gas Industry Look Like?
- Hybrid operations – Oil companies will increasingly combine traditional drilling with renewable energy production, using on-site solar, wind, and hydrogen.
- Carbon-negative operations – Future oil extraction sites could be net-zero or even carbon-negative, using carbon capture and low-carbon fuels.
- Alternative fuels & chemical refining – Biofuels, e-fuels, and carbon-neutral synthetic fuels will complement conventional oil products.
Economic Benefits of Decarbonisation
- Operational cost savings – Reducing methane leaks and improving drilling efficiency cuts costs and improves profit margins.
- Increased investor confidence – ESG-focused investors are favouring companies with credible decarbonisation strategies.
- Regulatory compliance & risk mitigation – Companies with low-carbon strategies will be better positioned to navigate new carbon policies and avoid penalties.
The Role of Consumers in Reducing Carbon Emissions
How Consumer Choices Affect Oil & Gas Demand
Consumers influence the demand for fossil fuels through their energy consumption choices. Sustainable behaviours include:
- Switching to electric vehicles (EVs) – Reducing gasoline and diesel demand.
- Using renewable energy for homes & businesses – Cutting reliance on fossil-fuel-based electricity.
- Choosing lower-carbon transportation & aviation – Airlines and shipping companies now offer low-emission flight and cargo options.
Encouraging Sustainable Consumption Habits
Governments and businesses must educate consumers on low-carbon energy options and invest in infrastructure for EV charging, green hydrogen, and sustainable fuels.
Conclusion: The Path to a Low-Carbon Oil & Gas Industry
Reducing carbon emissions in oil and gas is no longer optional—it is a business and environmental necessity. By deploying advanced drilling technologies, investing in carbon capture, and integrating renewables into operations, oil and gas companies can future-proof their businesses while reducing their environmental footprint.As global pressure to cut emissions intensifies, early adopters of carbon reduction strategies will gain a competitive advantage in an increasingly low-carbon economy.Interested in how your company can reduce emissions while maintaining operational efficiency?
Ask us about our carbon accounting solutions designed for the oil & gas sector.
