In the energy sector, a bit of collaboration can go a long way. 

In the past, collaboration has helped bring new efficiencies, such as when several assets share the same enabling infrastructure. It’s also helped establish common safety standards with industry bodies agreeing on life-saving rules. And now, it can help to reduce carbon intensity across the sector — because, in an interconnected sector like energy, the actions of one company can flow through to many others.

At Petrofac, like most energy companies, we have worked hard to reduce or eliminate our own scope 1 and 2 direct emissions. We’re also working to understand our indirect or scope 3 emissions — including those that occur upstream, primarily from the embedded carbon in our purchased goods and services, and those that occur downstream from the operational emissions of the energy facilities we design and build.

Overall, we have made good progress. But to really move the needle, the industry could benefit from a more cohesive approach. 

Clients arguably have the most to gain and can wield the most influence. Almost all energy companies have made commitments to reduce or eliminate their own scope 1 and 2 direct emissions, which equate to scope 3 emissions for the wider industry. And one of the surest ways to do this is to reduce the operational emissions of their oil and gas assets.

When building new facilities or upgrading brownfield assets, clients have the option to request and reward low-carbon designs. This could be as simple as giving Engineering Procurement and Construction (EPC) contractors the option to submit an alternative low-carbon bid. It could also extend to maximum requirements — or cut-off points — on carbon intensity similar to the minimum requirements on In-Country Value, which are included in most EPC contracts. 

Another approach would be to consider the total lifecycle emissions and operating costs of a new facility, not just the upfront capital costs. This is because more sustainable engineering designs tend to equate to more cost-effective facilities, which are both cheaper to run and mitigate the risk of future carbon costs – such as taxes and/or offsetting initiatives.

Aside from adopting a low-carbon mindset across their operations and championing low-carbon engineering and construction solutions, the most significant contribution an EPC contractor can make is to engage with their supply chains and help them to reduce the carbon intensity of their respective products and services. 

Although the big multinational vendors may be well advanced on their decarbonisation journeys, smaller players may struggle to acquire the necessary expertise and disciplines. We know that many of our suppliers actively welcome support and guidance – such as decarbonisation toolkits incorporating checklists, templates and training.

Typically, EPC contractors will work with the same pool of suppliers. So, when each one embraces a decarbonisation ethos, the impact can be significant. The imperative from a supplier perspective is to become disciplined in reducing and reporting embedded emissions, and to routinely acquire Environmental Product Declarations (EPD) certifications for all products.

The demand for this type of documentation and reporting is gradually trickling down through the extended supply chain. But forward-thinking suppliers are rising to anticipate and meet the demand, and to provide a range of lower-carbon options.

It seems most players in the energy sector are open to decarbonisation. The challenge is that they are all approaching it in a slightly different way. And, across the sector, a lack of consistency can cost time and money, impede progress, and increase the compliance burden across the value chain.

Industry bodies can create real value by facilitating collaboration through their respective working groups and brokering a common, joined-up approach. For example, by promoting a common approach to EPDs and promoting standardised supplier questionnaires on Environmental, Social and Governance themes, they can do much to reduce the burden, level the playing field, and smooth the journey to decarbonisation.