Dr. Juan Vazquez, Managing Director & Partner at BCG and Tomás Estevez, Principal at Boston Consulting Group (BCG)
Doha: As oil and gas (O&G) companies navigate the turbulent business climate that pressures the wider industry, they are faced with an obstacle that will persist long after current difficulties subside - decarbonising their operations. Although a multitude of companies have made sizeable and sustained progress in this direction, the expectations from regulators, shareholders, and society as a whole will continue to grow - with firms required to deliver accelerated progress in reducing their emissions footprints and implementing sustainable operations.
Qatar, similar to other countries in the region, is taking proactive actions to address the decarbonisation challenge. For example, the world’s leading liquefied natural gas (LNG) exporter recently commissioned the region’s largest carbon dioxide (CO2) recovery and sequestration facility, with the Ras Laffan plant widely expected to have a capacity exceeding 2 million tonnes per year. By 2025, it is also projected to capture and isolate over 5 million tonnes annually - showcasing the nationwide commitment to solving environmental issues and secure energy supplies.
An important note to consider is that Qatar’s LNG expansion projects will have a positive effect on global CO2 output due to the country’s efficiency when compared to other LNG producers. LNG expansion is set to increase from 77 million metric tonnes per annum (Mtpa) to 110 and 126 in 2025 and 2027, respectively. In fact, Qatar stands to be the most efficient producer in terms of extraction when compared to other producers in the US, Australia, Russia, Malaysia, Norway, and Nigeria, to name a few.
However, it is considerably expensive to reduce carbon emissions originating from Qatar itself, going up to QAR 1000/t CO2 to abate emissions from the O&G and industrial segments, as well as power, heat, and water. As such, Qatari operators and their ecosystem of servicing companies must pursue a comprehensive roadmap tailored to the LNG sector, one capable of mitigating constraints, presenting opportunities, and driving value-accretive decarbonisation in line with the Paris Agreement – which aims to limit global warming.
Current policies would see a certain reduction in world emissions by 2050. Yet new policies guided by these principles would drive reductions below 40 percent within the same period - meeting the Paris Agreement’s target of limiting global warming to 1.5 degrees Celsius.
Within the next five years, organisations will experience mounting demands to demonstrate that portfolio assets are carbon neutral. However, it would be prudent for every player to be proactive, productive, and begin making related decisions right away due to long lead timeframes associated with exploration and development. It is important to note that different phases entail different considerations - and the exploration lever should be geared towards capturing low-carbon-intensity assets, lowering emissions, and enhancing the appeal of potential investments via tax credits and offsets.
Looking ahead, thorough prioritisation and planning will be essential elements to decarbonisation success. Every industry player in Qatar should also prioritise overhauling its development and execution processes.
Companies are recommended to implement new and improved low-carbon oil recovery methods for heavy crudes and employ zero-carbon electricity, carbon capture, and storage technologies.
As the need to combat climate change and capitalise on sustainability opportunities continues to magnify, failure to do so in the years ahead would have dire implications. To avoid this scenario altogether, Qatari O&G players should take the initiative now by adopting the four levers mentioned above. Greater revenues, enhanced brand positioning, and reputation, and better opportunities to shape the future landscape all await. But first, successful decarbonisation must be achieved.
This article was co-authored by Dr. Juan Vazquez, Managing Director and Partner at Boston Consulting Group (BCG) and Tomas Estevez, Principal at BCG.
