Using renewables to reduce emissions from oil and gas production

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Using renewable energy to power oil and gas extraction and refining is one way the sector can work to reduce its emissions.


  • Moving oil and gas operations away from fossil fuels reduces emissions and could save $8 billion in annual carbon tax payments.
  • 85% of emissions from oil and gas installations come from power generation, so there is room to lower lifetime emissions per barrel of oil by implementing green power solutions.
  • Energy companies risk a deluge of negative press and consumer backlash from greenwashing operations, nor will promises to use renewables save moribund projects.

Renewable energy is often juxtaposed with fossil fuels, with green energy seen as a direct threat to traditional fuel sources. While the winds of change (pun intended) are certainly blowing in a certain direction, renewable energy can also reduce emissions from the oil and gas sector, creating a counter-intuitive, complementary relationship.

There is no such thing as free energy, and a substantial amount of energy is required to extract oil and gas and transport them to consumers. With new oil sources increasingly becoming more difficult and costly to access, it does not make sense to burn oil to get it out of the ground in the first place.

Despite efficiency improvements, the energy intensity of oil extraction has increased 33% since 1980 by 2012, which has more than offset the 13% decrease in energy use in refining during the same period.

Judson Jacobs, Executive Director of Upstream Energy at IHS Markit explains that; “energy efficiency and reductions in flaring can only do so much to lower greenhouse gas emissions, so some companies are turning to zero-carbon sources to power their upstream, midstream, and downstream operations.”

This trend is important because 5% of global offshore production powers the very platforms extracting those resources.

That works out to annual emissions of 200 million tonnes of CO2 (more than all of Vietnam) just from powering offshore oil operations. Not only is this detrimental to the environment, but with rising carbon taxes, oil companies will (at a price of $40 per tonne of CO2) have to spend $8 billion (excluding fuel costs) to power their offshore rigs, according to Wood Mackenzie.

Beyond offshore to the oil and gas sector in general, 15% of global, energy-related greenhouse gas (GHG) emissions stem from extracting oil and gas and getting it to customers; all before a single drop of oil gets consumed by an end customer.

According to the International Energy Agency (IEA), using renewables in oil and gas extraction could lower total industry emissions by 3.2%, with efficiency improvements providing a further 4.1% reduction by 2030.

Burning oil to produce oil doesn’t make sense

Burning oil to get oil is inefficient, costly, and bad for the planet, so there is growing interest in powering oil and gas operations with renewable energy. As CBC reports, “[…] competition for oil investment will intensify [in coming years] with projects that combine profitability and sustainability rising to the top.”

Given that Canada’s carbon tax will increase from $30 per tonne in 2021 to $170 by 2030, there is a significant financial incentive to reduce production-related emissions. Power generation accounts for 85% of CO2 emissions from oil installations, so proactive companies are looking to decarbonize oil and gas production.

Norway has announced that half of its offshore developments will be powered by onshore renewables within the next decade, with the sector pledging to reach net-zero by 2050.

Newfoundland and Labrador also intends to reach net-zero by 2050, and is currently looking into using excess hydropower from Muskrat Falls to power up to four floating production, storage, and offloading (FPSO) vessels. These vessels would operate in the Cape Freels oil field in the West Orphan Basin, which is estimated to hold between 4-5 billion barrels of oil.

The FPSOs would be connected to a 400km long cord providing up to 200MW. The number of renewable energy projects within the oil and gas sector has risen from 14 in 2000 to over 45 in 2020, with projects announced in 2018-19 alone set to avert 3 million tonnes of CO2 each year.

Power generation accounts for 85% of CO2 emissions from oil installations.

Alongside harnessing onshore energy, offshore installations (as well as onshore facilities) can utilize photovoltaic cells to power things such as well-head control panels, chemical injection pumps, and supervisory / data acquisition systems in remote places. Concentrated solar power is another option that generates steam (a useful resource for oil extraction) via focused mirror arrays.

The first such system to be used for oil extraction was built in California in 2011, with another in Oman the following year.

Oman has been at the forefront of using solar to replace fossil fuels and is building a three square kilometer array to provide 6,000 tonnes of solar steam every day. Upon completion, the Miraah facility will have the highest peak capacity of any solar facility (1,021MW) in the world. Miraah will lead to a 300,000 tonne reduction in CO2 emissions.

Prior to shifting to solar power, 20% of Oman’s total natural gas consumption was being used to power oil extraction.

Spectre of greenwashing haunts energy firms

In the United States, Chevron has announced a four-year deal with Algonquin Power & Utilities Corp to purchase 500MW of renewable energy to power its oil and gas operations. It should be noted that the use of renewables by oil and gas companies is still very much in its infancy, as green investments by oil companies are less than 1% of total capital expenditure.

Even among those oil companies leading the green investment charge, only an average of 5% of total capital expenditure is flowing into renewables. Between 2015-2018, oil companies accounted for only 0.5% of global photovoltaic and 2% of offshore wind investment, although they were responsible for 38% of carbon capture investment.

Sustainability isn’t an afterthought or a Hail Mary, it has to be front and center from Day One.

The IEA notes that “the transformation of the energy sector can happen without the oil and gas industry, but it would be more difficult and more expensive.

Oil and gas companies need to clarify the implications of energy transitions for their operations and business models, and to explain the contribution that they can make to accelerate the pace of change.” There is also the issue of ‘greenwashing’ – polluting industries paying lip service to renewable energy – which can generate public backlash and undermine other companies’ efforts to green their portfolios.

On their own, using renewables to power oil and gas operations is not enough, wider sustainability issues need to be addressed.

Take the case of Keystone XL, which announced on January 17th, 2021 that it would use 100% renewable energy (including energy credits and offsets) to power the pipeline by 2030.

This would be brought about with an investment of $1.7 billion in 1.6GW worth of renewable energy along the pipeline’s route, a move said to eliminate 3 million tonnes of CO2 (equivalent to 650,000 cars). This 11th hour announcement from a dead-on-arrival project came just three days before President Joe Biden revoked permission for the project on his first day in office.

Sustainability is not an afterthought or a Hail Mary, it has to occupy a central place in planning considerations from day one.

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Tomas van Stee

CEO & Founder

Tomas independently grew the company to its initial product market fit with $500k in revenue, and is now leading our rapidly growing team. He spends much of his time overseeing strategy and operations at EnPowered as we navigate many complex and heavily regulated markets. He graduated from the Richard Ivey School of Business at Western University with a Bachelor of Arts in Business Administration.