Major oil and gas operations have climate impact far beyond simply extracting the fuel or burning it in a car. A complex supply chain removes these raw materials, refines them into new forms, and ships them all over the globe. This value chain can be broken down into three distinct categories:
· Upstream (exploration, field development, production operations)
· Midstream (transportation, processing, storage and distribution)
· Downstream (manufacturing, refining and petrochemicals, wholesale and marketing)
Industry operators and asset owners must integrate with an interconnected web of partners and service providers. They may exert only limited control over this complicated system. As such, operators often will not assume full responsibility for emissions from external third parties and only account for those emissions over which they exert direct control. Yet, this excludes a large source of emissions not controlled by those asset operators that still contribute to the overall carbon footprint of their products.
Emissions come from numerous sources throughout this process with each contributing to the overall carbon footprint. The Greenhouse Gas (GHG) Protocol defines the three widely accepted emissions scopes ranging from fuel combustion and fugitive emissions (Scope 1) to purchased energy (Scope 2) to a variety of other indirect emissions to include transportation and distribution and waste disposal (Scope 3). Many of these Scope 3 emissions do not factor into company GHG accounting metrics.
A recent report by Bloomberg Green highlights that Saudi Arabian Oil Co. (Aramco) may underestimate their emissions by 50%. Bloomberg Green asserts that Aramco “excludes emissions generated from many of its refineries and petrochemical plants” after reviewing public filings. These downstream assets generally fall under Scope 3 emissions and are often excluded. This claim of underestimation comes at odds with Aramco’s declarations of high-standards and clean fuel.
By leaving these certain midstream and downstream operations out, Aramco misses its true and complete picture of emissions. This could be interpreted as “green washing”: a form of misrepresentation or understating true environmental impact to maximize return on climate-aligned investment or incentive.
While likely a miscommunication rather than malintent, Aramco risks losing trust among its early backers. Investors in Aramco’s recent record-breaking IPO deserve to understand the emissions impact of the complete carbon-cycle, not just emissions from production. Since the report came to light, Aramco officials said they would disclose their previous year of full emissions data to include those otherwise uncounted Scope 3, downstream emissions.
To avoid future issues of this type, major operators must commit to the highest reporting standards inclusive of all three emission scopes and invest in technologies that capture the carbon footprint of their entire value chain. Most importantly, each of these independent data streams must be traceable to its source – captured “ground truth.”
Working with Rocky Mountain Institute (RMI), Context Labs has helped capture the complete picture of emissions in the Texas’ Permian Basin through the Immutably-powered Climate Action Engine. Our teams aggregated and profiled hundreds of thousands of well assets and integrated them with self-reported flaring data, aerial survey data from RMI private survey partners, and VIIRS satellite data from RMI academic partners to capture the truest picture of emissions fed by ground truth and verified by the latest sensing technologies. This analysis feeds the most clear and complete picture of emissions verification for that region and will enable RMI and its partners to enhance public access to this most complete picture, enable third-party verification and improve industry standard protocol certifications. In parallel, our teams at Context Labs and Spherical | Analytics are engaging with energy suppliers and their partners to enable more specific, accurate, and verifiable disclosures about climate performance of oil and gas companies’ operations. Regulatory filings are necessary and insufficient - so too are voluntary disclosures that are not “material, comprehensive, and consistent.”
Only through the evolution of voluntary disclosure of private data - what we call ‘Asset-Grade-Data’ secured, attested and verified by SMEs - can operators fully capture, address and disclose their complete carbon footprint, and how they are addressing it. While not yet a complete picture of Scope 1-3 emissions for the Permian Basin, this work leverages the full spectrum of compliance reporting, and enhances it with myriad SME partners, and increasingly, private disclosures.
A combination of better standards, more trusted data, and independent verification /certification could have prevented this issue for Aramco and risk for its climate-aligned investors. Only through trusted and auditable data can major operators expect their climate disclosures to have impact, and ensure their opportunity to participate in future energy transitions in a changing world.