Long targeted by environmentalists for their impact on the climate, oil companies are conjuring ways to cut their emissions - not only to burnish their image, but also to slash costs.
Companies like Chevron Corp. (CVX), Exxon Mobil Corp. (XOM) and Apache Corp. (APA) are tinkering with different ways to reduce the rate at which they emit carbon dioxide and other heat-trapping gasses that scientists say cause global warming.
These attempts range from capturing carbon dioxide from natural gas fields and storing it into the ground to switching dirty fuels like diesel for cleaner ones like natural gas in their platforms and vehicle fleets. Not an easy path to take in an industry where operational success makes you look like a global warming bad boy - but one that seems inevitable as countries like the U.S. devise legislation to curb emissions.
"We're getting pressure," said George Kirkland, Chevron's executive vice-president for Global Upstream and Gas, in a recent interview with Dow Jones Newswires. "We have to recognize where are the opportunities to be more efficient."
The quest is geared not only to appeasing public opinion, but also to saving money. The companies are seeking to avoid paying extra for emissions that would carry a price under proposed carbon-cap schemes. Increased efficiency also means lower operating costs.
But the move points to a dilemma. If oil companies want to keep shareholders happy, they must pump an ever-increasing amount of hydrocarbons, or refine more crude, activities that tend to bloat emissions.
Even maintaining oil and gas production flat can result in an increase, as declining fields require ever more effort to yield the same amount of treasure. Also, the amount of energy needed to bring new production on-line is on the rise, as easy oil runs out and companies seek out harder-to-exploit reservoirs in Canada's oil sands and the deepwater.
"Increased production puts an upward pressure on absolute emissions," said the world's largest publicly traded oil company, Exxon Mobil, in a report submitted to the Carbon Disclosure Project, a non-profit organization that tallies corporate emissions.
Most of the oil industry's direct emissions come from fuel burnt while producing hydrocarbons, and from the flaring of natural gas associated with oil production when the commodity can't be liquefied or taken to market. Exxon views energy efficiency and the reduction of flaring as its "primary areas of opportunity" to curb emissions; part of the 7% reduction in emissions the company reported between 2007 and 2008 came from reduced flaring.
Houston-based Apache switched the fueling of its U.K. Forties Field from diesel to natural gas, cutting 2008 emissions by 32% from 2006. The company says in its Carbon Disclosure Project report that it seeks to increase the usage of natural gas "wherever possible," including its U.S. vehicle fleet. The company is undertaking a complete tally of its emissions, and mulling potential projects to curb emissions across its global operations.
Carbon sequestration is still in its infancy, but it could help tame the high CO2 profile of mammoth projects. When Chevron began planning the development of the Gorgon field - a giant gas project in western Australia - it decided to sequester some of the carbon dioxide associated to the area's natural gas, a $1 billion investment. The decision likely helped score the environmental permits that allowed Chevron to sanction the project earlier this month, said Kirkland.
Other projects like the emissions-intensive but oil-rich Canadian oil sands may also require creative solutions to develop to their full potential. The company says that it has reduced the amount of air emissions generated for every ton of oil produced by 66% since 2000.
"There's challenge there," said Kirkland. But the oil industry "has responded historically over ways to be more efficient," he added.