Feb-2025

Harnessing the power of data for oil and gas in the energy transition

Effective electrification is instrumental in the industry’s progress towards net zero and meeting decarbonisation goals.

Daniel Mardapittas
Powerstar

Article Summary

The oil and gas (O&G) sector plays a critical part in the global energy transition, and more than 50 companies have now signed up to the Oil & Gas Decarbonization Charter (OGDC), launched at COP28. But who determines what an effective decarbonisation strategy looks like, and what is the role of electrification in this process?

This article considers incremental steps industry players can take to demonstrate progress towards net zero and looks at modern energy management technologies that can facilitate these ambitions.

Current pledges and future standards: Where are we now?
O&G will be critical for the foreseeable future, and the global demand for O&G looks set to continue through to the 2050s. According to one industry report, the demand for oil may peak in the 2030s and then decline towards 2050, with the speed of decline dependent on the progress of the energy transition. Peak gas demand looks further off, with a possible rise after 2040. There may, however, be a steep decline if electrification and renewable energy sources continue to grow rapidly (McKinsey & Company, 2023).

Indeed, continued expansion in renewables and low-emission energy sources indicates that these could potentially make up 85% of global power generation by 2050. Projections such as these show that O&G will play a vital role in energy supply for the next few decades, but they also suggest longer-term precariousness. This points to a future requiring significant adaptations to existing practices and processes.

As a high-emitting sector, O&G recognises the need to decarbonise – to meet net-zero commitments and to secure the industry’s place in the future of the global energy economy. To this end, the 50-plus signatories to the OGDC have committed to action across three areas:
- Net-zero operations by or before 2050.
- Aiming for near-zero upstream methane emissions by 2030.
- Zero routine flaring by 2030.

In this article, we concentrate on the first of these pledges – net-zero operations – and on electrification and the measurement of decarbonisation, where Charter signatories “aim to reach net-zero CO₂eq emissions (Scope 1 and 2) for operations under our control and, as applicable, engage with joint operating partners towards net-zero CO₂eq emissions (Scope 1 and 2), by or before 2050” (COP28UAE, 2023).

As a high-emitting and complex sector, O&G faces very specific challenges, but it is also uniquely placed in having the skills, assets, and power to drive global decarbonisation. The Science Based Targets Initiative (SBTi) – a world-class standard for business to set, measure, and demonstrate progress on net zero – has recognised the complexities and challenges faced by O&G companies. To this end, SBTi are engaged in a development project for a new Standard for O&G companies, focusing on supply, demand, and finance (SBTi, 2024).

Where this new standard considers supply, SBTi will require O&G companies to address processes and related emissions. The Terms of Reference for the Oil and Gas Standard Development project include specific project aims for a standard that “contains minimum required criteria, recommendations and guidance for the companies operating in the production of oil and gas to set 1.5ºC-aligned science-based emission reduction targets across scopes 1,2 and 3.” (SBTI, 2023). While this project is underway, SBTi has put a pause on validations and commitments from companies in the fossil fuels sector.

In advance of the requirements of the forthcoming SBTi standard and in line with pledges made under the OGDC, O&G companies should be looking to their own infrastructure, operational activities and logistics: the avenues where incremental steps can make a difference. To set targets and measure progress in the absence of a new sector standard, O&G companies that prioritise data and digitisation can gain significant advantage by managing decarbonisation strategies and measuring and documenting success.

Data and digital assets to inform a decarbonisation strategy
Looking to energy efficiency and decarbonisation strategies, harnessing data and implementing AI-driven technologies can improve operational performance, reducing Scope 1 and 2 emissions while lowering energy costs. For example, better and greater data acquisition and usage can inform preventive maintenance, helping to reduce the risk of unexpected equipment failure. This can cut downtime for greater production efficiency while helping avoid unnecessary equipment replacement, thereby impacting on both production costs and emissions. As a feature from EY notes, “the most competitive and successful oil and gas companies will be those that accelerate the digitization trend: adopting new tools and techniques, including the Industrial Internet of Things (IIoT), analytics, big data, and robotic process automation (RPA) to transform operations from the wellbore to the back office” (Adomaitis, 2022).

In this context, AI-driven energy management, when incorporated into a microgrid (see Figure 1), can provide critical data to drive energy efficiencies. A digital twin can offer the ideal environment in which to test and assess the efficacy of energy infrastructure projects, harnessing data for evaluation and mitigating potential issues before they occur through advanced modelling and simulation.