{"id":11736,"date":"2021-07-08T08:49:07","date_gmt":"2021-07-08T07:49:07","guid":{"rendered":"https:\/\/www.westwoodenergy.com\/?p=11736"},"modified":"2025-04-25T16:43:49","modified_gmt":"2025-04-25T15:43:49","slug":"energy-transition-insights-the-green-barrel-added-confusion-or-a-serious-proposition-for-the-transition","status":"publish","type":"post","link":"https:\/\/www.westwoodenergy.com\/news\/energy-transition-insights\/energy-transition-insights-the-green-barrel-added-confusion-or-a-serious-proposition-for-the-transition","title":{"rendered":"Energy Transition Insights – The green barrel: added confusion or a serious proposition for the transition?"},"content":{"rendered":"[vc_row type=”in_container” full_screen_row_position=”middle” column_margin=”default” column_direction=”default” column_direction_tablet=”default” column_direction_phone=”default” scene_position=”center” text_color=”dark” text_align=”left” row_border_radius=”none” row_border_radius_applies=”bg” overflow=”visible” overlay_strength=”0.3″ gradient_direction=”left_to_right” shape_divider_position=”bottom” bg_image_animation=”none”][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_direction_desktop=”default” column_element_spacing=”default” desktop_text_alignment=”default” tablet_text_alignment=”default” phone_text_alignment=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_backdrop_filter=”none” column_shadow=”none” column_border_radius=”none” column_link_target=”_self” column_position=”default” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”1\/1″ tablet_width_inherit=”default” animation_type=”default” bg_image_animation=”none” border_type=”simple” column_border_width=”none” column_border_style=”solid”][nectar_animated_title heading_tag=”h3″ style=”color-strip-reveal” color=”Accent-Color” text=”Energy Transition Insights”][vc_column_text]\u201cThe oil and gas sector needs to be part of the energy transition.\u201d That\u2019s not from us, but from Jo Coleman, UK energy transition manager at Shell. She\u2019s just one of the growing number of industry experts\u2014including representatives from the International Association of Oil & Gas Producers, the Oil and Gas Climate Initiative, Equinor and Serica Energy\u2014who have appeared on our Energy Transition Now<\/a><\/span> podcast. If you haven\u2019t listened in to these interviews yet, and you want to know what your peers are planning to do in response to calls for a low-carbon future, then do make some time to tune in for our weekly sessions.<\/p>\n

Choosing the right path in the transition is not easy, and at times even confusing. In this edition of Westwood Energy Transition Insights, we take a look at one of the emerging concepts that some companies are pursuing: \u2018green\u2019 barrels.<\/p>\n

If you can spare two minutes, we are also conducting a short survey to understand your thoughts<\/span> on the energy transition and what you would like to hear and see more of. Click here to take the survey<\/strong><\/a><\/span>.<\/p>\n

David Linden
\nHead of Energy Transition[\/vc_column_text][divider line_type=”Full Width Line” line_thickness=”1″ divider_color=”default”][\/vc_column][\/vc_row][vc_row type=”in_container” full_screen_row_position=”middle” column_margin=”default” column_direction=”default” column_direction_tablet=”default” column_direction_phone=”default” scene_position=”center” text_color=”dark” text_align=”left” row_border_radius=”none” row_border_radius_applies=”bg” overflow=”visible” overlay_strength=”0.3″ gradient_direction=”left_to_right” shape_divider_position=”bottom” bg_image_animation=”none”][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_direction_desktop=”default” column_element_spacing=”default” desktop_text_alignment=”default” tablet_text_alignment=”default” phone_text_alignment=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_backdrop_filter=”none” column_shadow=”none” column_border_radius=”none” column_link_target=”_self” column_position=”default” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”1\/1″ tablet_width_inherit=”default” animation_type=”default” bg_image_animation=”none” border_type=”simple” column_border_width=”none” column_border_style=”solid”][vc_column_text]\n

The green barrel: added confusion or a serious proposition for the transition?<\/h2>\n

While the oil and gas industry has been setting targets to reduce its carbon footprint, recent legal and shareholder action has put the industry on alert around how to cut emissions as widely and quickly as possible. Broadly, the industry has been responding to this challenge by reducing operational emissions through electrification, managing flaring and venting, and improving efficiencies, and\/or diversifying away from oil, towards renewables and other transition technologies.<\/p>\n

But the response has varied significantly across the industry, depending on company size, location, value chain focus and ownership. And while targets are being set, the response will not be instant. For example, despite spending billions of dollars on low-carbon technologies, including renewables, hydrogen and carbon capture and storage, in the last five years, clean energy still only represented 1% of oil and gas capital expenditure in 2020, according to the International Energy Agency<\/a>.<\/span><\/p>\n

Therefore, while the world continues to demand hydrocarbons, the question is whether it is possible to sell oil in the traditional manner\u2014but with none of the worrisome emissions that are causing a problem to the Earth\u2019s atmosphere. That\u2019s the thinking behind so-called \u2018green\u2019 or \u2018carbon-neutral barrels,\u2019 production which is\u2014theoretically at least\u2014free from a carbon footprint.<\/p>\n

One of the most vocal proponents in this field is Scandinavia\u00b4s Lundin Energy, which in April announced it had sold the world\u2019s first-ever certified carbon neutrally produced oil to Mediterranean refiner Saras. The fuel was produced at Lundin\u2019s Edvard Grieg field, which already has one of the lowest carbon intensities in the world, at 3.8 kg of CO2<\/sub> per barrel of oil equivalent. This meant Lundin was able to produce 600,000 barrels of crude with a carbon footprint of 2,302 tonnes of CO2<\/sub>.<\/p>\n

This, in turn, was compensated for through \u201ca high quality, nature-based carbon capture project,\u201d certified by the Verified Carbon Standard (VCS), according to a press release<\/a><\/span>. In addition, the entire trade was independently certified as carbon neutral by Intertek under its CarbonZero standard. \u201cAs a result, there were no net emissions released during the production of each barrel delivered to Saras,\u201d Lundin said.<\/p>\n

Lundin clearly believes this is the future of traditional oil, since it is investing $750 million<\/a><\/span> to ensure all its production is carbon neutral by 2050.[\/vc_column_text][\/vc_column][\/vc_row][vc_row type=”in_container” full_screen_row_position=”middle” column_margin=”default” column_direction=”default” column_direction_tablet=”default” column_direction_phone=”default” scene_position=”center” text_color=”dark” text_align=”left” row_border_radius=”none” row_border_radius_applies=”bg” overflow=”visible” overlay_strength=”0.3″ gradient_direction=”left_to_right” shape_divider_position=”bottom” bg_image_animation=”none”][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_direction_desktop=”default” column_element_spacing=”default” desktop_text_alignment=”default” tablet_text_alignment=”default” phone_text_alignment=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_backdrop_filter=”none” column_shadow=”none” column_border_radius=”none” column_link_target=”_self” column_position=”default” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”1\/1″ tablet_width_inherit=”default” animation_type=”default” bg_image_animation=”none” border_type=”simple” column_border_width=”none” column_border_style=”solid”][vc_column_text]\n

Evolving green barrel definitions<\/strong><\/h2>\n

It is worth noting that Lundin\u2019s definition of carbon-neutral only included exploration, development and production-related scope 1 and 2 emissions. These typically represent just 10% to 20% of the total, and do not cover so-called scope 3 emissions. However, Lundin is far from the only company experimenting with low-carbon versions of traditional hydrocarbon products.<\/p>\n

In March, Australia\u2019s Woodside, joint owner of the Australian Pluto liquified natural gas (LNG) project along with Kansai Electric and Tokyo Gas, delivered the first cargo of \u2018carbon-offset condensate<\/a><\/span>\u2019 to Trafigura, an independent commodity trading company. The offsets were verified by VCS or Gold Standard and included emissions from extraction, storage and shipping of the cargo. And other companies are going further still.<\/p>\n

Shell also announced in March that it had taken delivery of the first ever carbon-neutral LNG cargo, from Gazprom. For all this delivery, all scope 1, 2 and 3 emissions from the LNG\u2014calculated using a UK Department for Environment, Food and Rural Affairs conversion rate\u2014were offset by \u201chigh quality, nature-based carbon credits,\u201d Shell said<\/a><\/span>.<\/p>\n

And earlier in the year, Occidental Petroleum\u2019s Oxy Low Carbon Ventures subsidiary delivered 2 million barrels of scope 1, 2 and 3 carbon-neutral oil to Reliance Industries in India. Macquarie Group structured the offset deal with offsets verified under the Verra Verified Carbon Standard programme, S&P Global Platts reported<\/a><\/span>.<\/p>\n

Following these initiatives, oil now also appears to be marketed as \u2018green\u2019 without its emissions (whether scope 1, 2 or 3) being fully reduced or offset. For example, the Moscow Times claimed<\/a> <\/span>that Russian state-owned producer Rosneft is planning to sell 100 million tons of \u2018green\u2019 oil a year from a Vostok facility currently under construction. The facility will have a 75% lower carbon footprint than other new projects thanks to \u201cadvanced technologies,\u201d including the use of wind energy to power operations.[\/vc_column_text][\/vc_column][\/vc_row][vc_row type=”in_container” full_screen_row_position=”middle” column_margin=”default” column_direction=”default” column_direction_tablet=”default” column_direction_phone=”default” scene_position=”center” text_color=”dark” text_align=”left” row_border_radius=”none” row_border_radius_applies=”bg” overflow=”visible” overlay_strength=”0.3″ gradient_direction=”left_to_right” shape_divider_position=”bottom” bg_image_animation=”none”][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_direction_desktop=”default” column_element_spacing=”default” desktop_text_alignment=”default” tablet_text_alignment=”default” phone_text_alignment=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_backdrop_filter=”none” column_shadow=”none” column_border_radius=”none” column_link_target=”_self” column_position=”default” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”1\/1″ tablet_width_inherit=”default” animation_type=”default” bg_image_animation=”none” border_type=”simple” column_border_width=”none” column_border_style=”solid”][divider line_type=”Full Width Line” line_thickness=”1″ divider_color=”default”][\/vc_column][\/vc_row][vc_row type=”in_container” full_screen_row_position=”middle” column_margin=”default” column_direction=”default” column_direction_tablet=”default” column_direction_phone=”default” scene_position=”center” text_color=”dark” text_align=”left” row_border_radius=”none” row_border_radius_applies=”bg” overflow=”visible” overlay_strength=”0.3″ gradient_direction=”left_to_right” shape_divider_position=”bottom” bg_image_animation=”none”][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_direction_desktop=”default” column_element_spacing=”default” desktop_text_alignment=”default” tablet_text_alignment=”default” phone_text_alignment=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_backdrop_filter=”none” column_shadow=”none” column_border_radius=”none” column_link_target=”_self” column_position=”default” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”1\/4″ tablet_width_inherit=”default” animation_type=”default” bg_image_animation=”none” border_type=”simple” column_border_width=”none” column_border_style=”solid”][image_with_animation image_url=”11590″ image_size=”full” animation_type=”entrance” animation=”Fade In” animation_easing=”default” animation_movement_type=”transform_y” hover_animation=”none” alignment=”” border_radius=”none” box_shadow=”small_depth” image_loading=”default” max_width=”100%” max_width_mobile=”default”][\/vc_column][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_direction_desktop=”default” column_element_spacing=”default” desktop_text_alignment=”default” tablet_text_alignment=”default” phone_text_alignment=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_backdrop_filter=”none” column_shadow=”none” column_border_radius=”none” column_link_target=”_self” column_position=”default” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”3\/4″ tablet_width_inherit=”default” animation_type=”default” bg_image_animation=”none” border_type=”simple” column_border_width=”none” column_border_style=”solid”][vc_column_text]Episode 6 of the Energy Transition Now<\/strong> podcast, featuring Clara Altobell<\/strong> of Serica Energy,<\/strong> now available.[\/vc_column_text][nectar_btn size=”small” open_new_tab=”true” button_style=”regular” button_color_2=”Accent-Color” icon_family=”none” text=”Listen Now” url=”https:\/\/www.westwoodenergy.com\/news\/video-podcasts\/energy-transition-now-podcast-episode-6-with-clara-altobell”][\/vc_column][\/vc_row][vc_row type=”in_container” full_screen_row_position=”middle” column_margin=”default” column_direction=”default” column_direction_tablet=”default” column_direction_phone=”default” scene_position=”center” text_color=”dark” text_align=”left” row_border_radius=”none” row_border_radius_applies=”bg” overflow=”visible” overlay_strength=”0.3″ gradient_direction=”left_to_right” shape_divider_position=”bottom” bg_image_animation=”none”][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_direction_desktop=”default” column_element_spacing=”default” desktop_text_alignment=”default” tablet_text_alignment=”default” phone_text_alignment=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_backdrop_filter=”none” column_shadow=”none” column_border_radius=”none” column_link_target=”_self” column_position=”default” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”1\/1″ tablet_width_inherit=”default” animation_type=”default” bg_image_animation=”none” border_type=”simple” column_border_width=”none” column_border_style=”solid”][divider line_type=”Full Width Line” line_thickness=”1″ divider_color=”default”][\/vc_column][\/vc_row][vc_row type=”in_container” full_screen_row_position=”middle” column_margin=”default” column_direction=”default” column_direction_tablet=”default” column_direction_phone=”default” scene_position=”center” text_color=”dark” text_align=”left” row_border_radius=”none” row_border_radius_applies=”bg” overflow=”visible” overlay_strength=”0.3″ gradient_direction=”left_to_right” shape_divider_position=”bottom” bg_image_animation=”none”][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_direction_desktop=”default” column_element_spacing=”default” desktop_text_alignment=”default” tablet_text_alignment=”default” phone_text_alignment=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_backdrop_filter=”none” column_shadow=”none” column_border_radius=”none” column_link_target=”_self” column_position=”default” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”1\/1″ tablet_width_inherit=”default” animation_type=”default” bg_image_animation=”none” border_type=”simple” column_border_width=”none” column_border_style=”solid”][vc_column_text]\n

Initial observations<\/strong><\/h2>\n

Based on these announcements, it would appear that some in the oil and gas industry see merit in a carbon-neutral or \u2018green\u2019 version of business as usual. It is hard to see this as anything other than a positive move since a net-zero world requires carbon emissions to be curbed wherever and as much as possible. While green barrels won\u2019t necessarily get rid of global warming right away, they are better than doing nothing\u2014and that should be applauded.<\/p>\n

Furthermore, developing low-carbon oil allows (at least in theory) numerous players to develop pilot projects and experiment with the market, showcasing the way forward for decarbonising the sector. In the long run, decarbonising oil production could offer valuable lessons to other energy-intensive industries faced with similar challenges in lowering emissions.<\/p>\n

Plus, it will allow players to differentiate themselves in an increasingly uncertain market, even if it only helps operators continue working with customers that have strict emissions control policies. At the same time, though, it is important to note that this nascent market faces several challenges:<\/p>\n