Abbreviations GHG Greenhouse Gas CO2 - Carbon dioxide CH4 - Methane N2O Nitrogen oxide LNG- Liquefied Natural

al Gas

Abbreviations GHG Greenhouse Gas CO2 - Carbon dioxide CH4 - Methane N2O Nitrogen oxide LNG- Liquefied Natural Gas

Highlights

We model two major oil and gas companies. We examine causes of Climate Change Increase in further research may produce other alternative to exist source of energy Combined efforts will help to meet carbon reduction target

ABSTRACT Playing a major role in the world, the oil and gas industry is faced with the challenge of climate change. This paper establishes the fact that climate change troubles our planet today. In establishing this fact the paper examines the causes of climate change, the relationship between climate change and the oil and gas industry through CO2. It further evaluates the various methods available to reduce CO2 emissions and the challenges the companies have in implementing the methods. This paper uses two major oil companies as case studies, to establish the above stated facts and concludes that oil and gas companies need to be involved in more research and development of alternative supply of energy, in order reduce CO2 emissions, in collaboration with other sectors of the economy in achieving the targets made regarding climate change, environmental laws and policies.

Keywords: CO2, Climate Change, Industry, Oil and Gas.

1. INTRODUCTION Climate change is a global topic that is continually deliberated on by companies in the oil and gas industry. The oil and gas industry is accountable for six per cent of global CO2 emissions, but the dispute over reduction of global greenhouse gases (GHG) related with climate change laid emphasis mostly on oil and gas companies (Mckinsey Quarterly company 2012). The cause for this emphasis on the industry is that within the total amount of CO2 emitted in the end utilization (transportation sector, power sector and heat generation), the oil and gas sectors account for nearly half of all global emissions in various sectors(Mckinsey Quarterly company 2012). While many still live in denial about the linkage between human greenhouse gas (GHG) emissions and the climate system, many other companies around the globe are already engaged in activities that will reduce their GHG emissions and investing in new technologies to meet energy demand. These companies are under constant monitoring and reputational pressure from governments, international bodies such as the United Nations (Kyoto Environmental and Regulatory laws) to reduce both upstream and downstream CO2 emissions, and to explore and implement alternative, energy efficient, and low- emission methods to meet energy demands from all sectors of the economy. These efforts will need to be undertaken while continuing to provide energy for socioeconomic needs. It is essential to know the position of the oil and gas industry by exploring some of the strategies has developed for reducing GHG emissions that would involve obvious changes in the production and utilization of energy. The oil and gas industry recognizes the major problems and prospects that lie ahead in addressing climate change.

2. Climate Change According to the Fourth Assessment Report of the United Nations Intergovernmental Panel on Climate Change (IPCC), global warming is beyond reasonable doubt a fact that exists. The report stated that the earth has experienced the warmest global surface temperature within 12 years, between the periods of 1995 2006 since 1859 (IPCC assessment report). The continuous increase of the earths surface temperature which is known as global warming has led to climate change such as sudden rise in the sea level, figure 1 shows the observed temperature changes in global average surface temperature, global average sea level from tide gauge data; and Northern Hemisphere Snow cover for March-April. All differences are relative to corresponding average for period 1961 1990 (IPPC assessment report 2007)

Figure 1 shows observed changes in the average surface temperature, global average sea level, and Northern Hemisphere snow cover for March and April. Source: (Fourth Assessment Report IPCC. 2007)

It can be deduced from figure 1 that the linear warming trend for over 50 years from 1956 to 2005 (0.13) [0.10 to 0.16] C per decade) is almost twice that for the 100 years from 1906 to 2005 (IPCC assessment report 2007). The average temperature of the global ocean has increased to the depths of at least 3000mm which has resulted to a continual increase in the sea level. The global average sea level rose with an average rate of 1.8mm (1.3 to 2.3) mm per year over 1961 to 2003 (IPCC assessment Report 2007). Several events prove that global warming is causing climate change by affecting the terrestrial biological ecosystem. Examples of such events are premature arrival of spring happenings, (happenings such as leaf- unfolding bird migration and egg-laying); and pole ward and upward shifts in ranges in plants and animal species (IPCC assessment report 2007). In some regions, greening of vegetation tends to occur earlier than normal in spring linked to longer thermal growing seasons. Changes have also been observed in marine and freshwater biological systems. These changes are linked with rising water temperatures, which also relates to changes in ice cover, salinity, oxygen levels and circulations. These changes have also resulted to modifications in types of algal, plankton and fish abundance in high- latitude oceans; increases in algal and zooplankton abundance in high- latitude lakes; and range changes and earlier fish migration in rivers. All these evidence shows that global warming leads to climate change (IPCC assessment report 2007). Global warming can be linked to increase in greenhouse gas(atmospheric gases) concentration such as methane, carbon dioxide gas CO2, nitrous oxide, chlorofluorocarbons, water vapour, aerosols, halocarbons, ozone. Scientists have categorized the causes of global warming into two major causes which are Natural causes and Human or Anthropogenic categories.

3.1 NATURAL CAUSES OF CLIMATE CHANGE These are activities that cannot be avoided because they happen naturally such as the eruption of a volcano emits CO2, vapour gases, aerosols in abundance to the atmosphere. Another natural cause of climate change that emits greenhouses gas is the Ocean Circulation which emits CO2 into the atmosphere. The Arctic tundra and wetlands also emits methane (CH4) and CO2 into the atmosphere when it melts. The Suns radiation is another natural cause of climate change because of the radiation variability. Scientist have concluded from various evidence that all the natural causes are not enough to cause the present Climate Change the world is currently experiencing now. This conclusion relies on the fact that the average amount of energy coming from the sun to the earth has been constant since 1950 (IPPC assessment report 2007).

3.2 HUMAN or ANTHROPOGENIC CAUSES OF CLIMATE CHANGE Burning of fossil fuel, deforestation, agricultural activities, land fill, human population are all emitters of CO2, CH4, N2O, Ozone, Aerosols, Halocarbons which are all GHGs gases. According to IPCC fourth assessment report 2007, global atmospheric concentrations of CO2, CH4, and N2O have increased noticeably as a result of human activities since 1950, which now exceeds the values that existed before the industrial revolution.

Figure 3. The diagram shows the concentration of CO2, CH4, and N2O in the atmosphere. Source: (Fourth Assessment IPCC Report 2007)

The figure 3 shows that since 2005 the increase in value of CO2, CH4 and N2O has far exceeded that of the normal concentration for the last 650,000 years (IPCC assessment report 2007). Global increase in CH4 is majorly due to the use of agriculture and landfill while the increase of CO2 is predominately due to burning fossil fuels, deforestation etc. The increase in N2O in the atmosphere is majorly due to the agricultural activities done by man. The increase of CO2 gases as increased from the pre-industrial age to the year 2005 from 280 ppm to 375ppm showing an average increase of about 1.9 ppm per year. CH4 concentration has also increased from the pre- industrial year of about 715ppb to 1732ppb in the early 1990 and in to 2005 it had a value of 1774ppb (IPCC assessment Report 2007). The rate of increase of N2O concentration in the atmosphere grew from 270ppb of the pre-industrial year and to a value of 319ppb of the year 2005 (IPCC

assessment report 2007). Scientist have resolved that If global warming is not controlled by reducing the amount of greenhouse gases we emit through human activities, the consequences will be total climate change, more storms, volcanoes eruption, extinction of some species of animals and plants, and new diseases will emerge and affect humans.( IPCC assessment report 2007) 4. Climate Change and the Oil and Gas Industry The oil and gas industry is one of the most powerful and global business sector and its activities and products are directly or indirectly related with raising greenhouse gases. In the oil and gas industry, from the process of exploration, production, processing, distribution, and to the consumers, at every stage (i.e. upstream and the downstream of the industry) there is always emission of GHGs either intentionally or by accident. This emission primarily occurs from normal operations, routine maintenance, process venting, leakages and system failure (e.g. well blowout, pipeline breakage, tanker accident, surface casing blow out) or disposal of waste product (e.g. Gas flaring or Venting). The most important of the GHGs emitted is the CO2; in 2010 the total amount emitted into the atmosphere was about 12.6 million tonnes CO2 (Klima 2011). The major contributor of CO2 emission in the industry is the disposal of waste through flaring. Flaring or venting of gas is a form of disposing excess gas that is generated during exploration. This system is normally used in oil and gas producing countries where there is no facility to utilize the gas produced. The total amount of gas flared or vented is about 150billion cubic meters of gas every year which accounts for one third of the European Unions annual gal consumption. The total amount of CO2 emitted per year is 400 million tonnes. Venting or Flaring of gas used to be a norm until Global warming was linked to more of CO2and human activities (Klima 2011). This makes the oil and gas industry a major focus when it comes to climate change, although they are not the highest emitters of GHGs gases, however they produce lots of CO2 which has been attributed to highest composition of GHGs causing climate change.

5. The Roles Oil and Gas Industry Combating CO2 Emission Having established that the activities and products of the industry has a negative impact on the environment, various organisations (such as United Nations), National Governments have put in place Laws and policies for the oil and gas industry to work on minimising the amount of CO2 emissions released into the atmosphere. 5.1 Production of Liquefied Natural Gas The Oil and Gas industry has adopted the production of Liquefied natural gas (LNG) as a method for combating CO2 emissions. This method substitutes for the flaring or venting of excess gas after production. Instead of flaring or venting, they are compressed and converted to LNG to be used as an alternative to fossil fuel for the production of electricity, heating, and other forms of energy. The increase in LNG production has cut down emission of CO2 in countries like Nigeria and Algeria. 5.2 Carbon Capture and Storage This is an important process used in confronting CO2 reduction in the industry. Unwanted CO2 gas is captured from coal, biomass, oil and natural gas, and it is transported through pipelines to be stored undergrounds in depleted oil or gas reservoir. The Salah Project in Algeria and The Sleipner Project are examples of carbon capture and storage process.

5.3 CO2 ENHANCED RECOVERY The injection of unwanted CO2 gas into matured fields to increase recovery rate or to reduce the viscosity level of some other fields are ways to combat with CO2 emissions for the oil and gas industry. Many oil and Gas industry use this process to enhance production rate of oil from matured wells in the United States of America and other parts. Wells with high viscosity crude are mixed with CO2 in other to ease the flow rate of the oil out of the wells. After production, the carbon is injected back into the wells for storage. This helps to dispose the waste and consequently reduces the amount of carbon that would have been emitted during production. 5.4 Renewable Energy Investment Renewable energy sources are climate friendly. They do not emit CO2 or any greenhouse gas that might affect climate. Renewable energy sources are harnessed from natures potentials to produce energy. Such sources of energy are derived from Solar, Biofuel, Wind, Wave, and Hydro energy. Although it requires a lot of capital to stat of any of this energy system, some oil and gas companies are investing into it to reduce CO2 emissions. 5.5 Energy Efficiency Most oil and gas companies strive to be role models to other organisations or sectors regarding energy utilisation. They identify, organise and implement programs that focus on strategies to manage energy usage. The oil and gas corporations have adopted various ways in tackling their CO2 emissions to meet the kyoto policy implemented by governments to reduce carbon emissions. Using two major oil companies as our case study to analyse methods used to reduce emissions.

6. CASE STUDIES 6.1 ExxonMobil Strategies in Combating CO2 Emissions ExxonMobil is committed to combating CO2 emission through energy efficiency and investing in renewable energy. Exxon Mobil converts its wasted energy to produce thermal heat, electricity, or steam. In more than 30 locations has interest in 100 cogeneration facilities with a capacity to provide approximately 4,300 megawatts (MW) of power or electricity to meet the energy demand of about seven million household in Europe. Exxon Mobil has embarked on new development of cogeneration facilities in China, Belgium, Singapore and Kazakhstan to produce a total of 875MW of power (IPIECA 2007). Investing in wind energy, ExxonMobil has more than 40% of the total installed wind generation capacity in Germany, 85% in the United States and 75% of the total wind energy generation in the Spanish capacity (IPIECA 2007). 6.2 The Royal Dutch Shell strategies in combating CO2 Emission The Shell Company in partnership with Nuon Power Company invested in Wind energy to generate electricity in The Netherlands from the Egmond ann Zee Offshore Wind Farm in the North Sea. The wind farm with a capacity of 108MW supplies about a 100,000 homes with power and saving 140,000 tons of CO2 emission a day (IPIEA 2007). The development and production of Biofuels is a major strategy for producing energy and reducing CO2 emission for the Shell Company. With 30 years in production of Biofuel, in 2009, 9 billion litres of biofuel was distributed. They are Involved in more research and development programs to develop biofuel in order to meet energy demand with less carbon emission (Shell 2009). They have a non-binding memorandum of understanding to form a joint venture in Brazil with Cosan to produce ethanol from sugar cane, the lowest-carbon biofuel (Shell 2009).

Shell is known to promote Carbon Capture and Storage and is working in partnership with many governments to reduce CO2 emissions (shell 2009). One is the Gorgon liquefied natural gas project (Shell 25% interest) in Australia that will capture up to 4 million tonnes of CO2 a year. At the end of 2009 it was the worlds biggest full-scale CCS project confirmed so far (Shell 2009). In partnership with Vehicles manufactures, they have adopted to produce hydrogen to hydrogen cars. They currently have few hydrogen stations in the United States. They are involved in the research and development of electric cars all to find ways to reduce carbon emissions (Shell 2009).

7. THE CHALLENGES OIL AND GAS COMPANIES ENCOUNTER IN REDUCING OF CO2 EMISSIONS 7.1 ECONOMIC CHALLENGE The utilisation of these methods from carbon dioxide enhanced oil recovery (CO2 EOR), liquefied natural gas (LNG), carbon capture and storage, and energy efficiency are strategies the oil and gas companies engaged in to combat CO2 emissions. These procedures involve large amount of capital to be developed, implemented and maintained. Very few oil and gas companies can invest in this methods especially carbon capture and storage. Cost is one major limitation to utilisation of this method, meaning that some oil and gas companies especially the national oil companies which do not have enough financial support will continue to emits some amount of CO2 into the atmosphere which will increase global warming continuously (Mckinsey Quaterly Company 2012).

7.2 ENVIRONMENTAL CHALLENGE When adopting the renewable energy most oil and gas companies are faced with environmental issues one way or the other. For instance the production in the production of biofuels requires different feedstock such as soybean, palm oil, sorghum, wheat, corn, microalgae, there is an issue of deforestation which emits CO2 into the atmosphere. Another problem associated with renewable energy is the sharing of the crops for food and for carbon emission which will result to the problems of food security and subsequently the increase in food price (Schlumberger 2012). The use of wind farm as a method to reduce carbon emission also raises an eyebrow when it comes to the use of land and it is argued that it is dangerous to the ecosystem i.e. might cause migration of birds. The best available feedstock when considering renewable energy might be the use of microalgae. The microalgae feedstock does not cost much, does not compete with food, does not result to deforestation are advantages over other feedstock. The only disadvantage to the feedstock is the unavailability in excess. 7.3 POLITICAL CHALLENGE In oil producing countries, political instability, change of governance or leadership in a country sometimes acts as a limitation to implementing a method to CO2 emission reduction. For instance a project like the Chevron Escravous Gas to Liquid project in the Niger Delta area of Nigeria was abolished. This project would have reduced the amount of flaring down in the country subsequently reducing the CO2 emitted because it would have been converted to meet other demand of energy such as Jet fuel for airplanes. One of the major reasons why this project was neglected was as a result of change in governance. When there are issues within the government this may affect projects that are supposed to be done together with the oil and gas industry to reduce emissions. In 1990 the UN's Intergovernmental Panel on Climate Change (IPCC) (of which the USA is the largest funder) reported on the problem of global warming, which is by far the most important and serious environmental issue. "In 1997 a protocol was adopted at Kyoto under which countries formally undertook to reduce

the emission of greenhouse gases by specific percentages of the 1990 levels. Bill Clinton hailed the Protocol as a historic agreement and signed it in November 1998. But President Bush from 2001 opposed it and acted to overturn his predecessor's signature of the Protocol, reverse an election pledge to treat carbon dioxide as a pollutant and revert to actions solely driven by domestic economic concerns" [General Sir Hugh Beach 2002 cited in Vexen Crabtree 2002]. When there are issues within the government this may affect projects that are supposed to be done together with the oil and gas industry to reduce emissions. 7.4 INAPPROPRIATE ENVIRONMENTAL LAW AND POLICY: MAJOR BARRIER TO THE SUCCESS OF CO2 EMISSION Environmental laws and policy are really numerous and some are quite unstable for the Oil and gas companies to achieve especially individual companies. Most of them are reasonable enough that they actually help to meet the demand in reducing CO2 emissions. Development of appropriate environmental law and policies would minimize any barriers, preclude action and enable measurable progress of carbon dioxide emission reduction by oil and gas companies. Effective development and implementation of environmental law and policies that focuses on lower carbon life-cycle emissions also require strategies that focus on the lifecycle attributes of energy resources such as natural gas, renewable and coal. Effective environmental law and policies such as the polluter pays principle, carbon pricing should be implemented at the federal, state and local level in all oil producing countries in order to solve the issue of climate change. This would remove all forms of obstacles towards a successful target in the reduction of CO2 and climate change problems.

8. CONCLUSION AND RECOMMENDATION Oil and gas companies play a principal role in global emissions both as direct emitters of CO2 and as suppliers of fossil fuels. With increase in the global energy demand, oil and gas companies should do more research and development in renewable energy so as to meet some reasonable percentage of the energy demand with low carbon emission production. The oil and gas companies productivity in terms of profit will be affected in some regions, due to regulations and implementations of the various methods of cutting carbon emissions. This will have an effect on the long term demand patterns and will keep only the top players in business that would be ahead during these changes by mitigating the downside risks through internal-abatement efforts and by taking advantage of opportunities that this rapidly changing business environment. In other words, the government has to intervene financially to support smaller companies and national oil companies to enhance the success of CO2 emission reduction knowing most national oil companies (NOCs) lack potentials to manage large, expensive and complex project like carbon sequestration technology. Planting of trees should be encouraged to indirectly capture and store CO2 emitted into the atmosphere through photosynthesis. CO2 emission poses to be a dangerous problem to human race, therefore to conquer the issue of Climate Change, collective efforts from several sectors such as the oil and gas sector, government sector, industries, commercial and domestic sector, public and private sector etc. with reasonable and consistent regulations in place will be essential.

ACKNOLEDGEMENTS I gratefully thank everyone that supported me one way or the other during the research of this paper.

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