August 23, 2022 | Oil and Gas
Oil and gas operations were responsible for releasing over 76 million tons of methane globally in 2020, making the energy sector one of the largest contributors to greenhouse emissions.
There has been mounting pressure from stakeholders, the public and the government on the oil and gas sector to reduce emissions.
In the U.S., Senate Democrats have agreed on a legislative deal to deploy $370 billion towards climate and energy security measures, with the goal to reduce greenhouse emissions by 40% by 2030.
A crucial component toward this effort would be oil and gas companies making tangible "greener" shifts in operations.
One of the most effective steps they can take is to replace equipment that has been operating for over 20 years.
Old legacy equipment is not energy-efficient — it emits more pollutants. This equipment could be gas compressors, engines, valves, mechanical pumps, heaters, flares, heat exchangers, etc. Replacing it with newer more efficient systems will help oil and gas companies reduce scope 1 and 2 emissions by up to 70%, according to the World Energy Outlook Report 2021.
Fines due to leakages, more service costs due to frequent breakdowns and needing to purchase custom-machine parts, make legacy equipment, more expensive to operate compared to newer, “greener” equipment. Capital managers and procurement and operations teams in oil and gas companies should collaborate to rebuild and optimize these asset footprints, lower emissions, and execute the needed steps to meet climate and ESG goals.
Up to 56% of all shutdowns in the upstream oil and gas sector are unplanned. Generally, the causes of these shutdowns are due to power failure, weather disruption and, most importantly, equipment malfunction. On average, offshore oil and gas organizations yearly lose a whopping $38 million due to older, malfunctioning equipment.
Moving to newer, greener equipment requires considerable planning, resources and collaboration on the part of procurement and operations teams, but it yields big rewards.
An effective way to maintaining and operating plant assets is about using principles of total cost of ownership (TCO) to better understand hidden costs.
The TCO approach will help procurement teams to execute legacy equipment replacement projects by leveraging the latest technology and asset management strategies.
To get deeper insights on how reducing legacy systems can help reduce carbon emissions in the oil and gas sector, give this bulletin by GEP a read.