reducing embedded carbon & EPC related emissions in oil & gas facilities
Updated: Jun 4
Are you considering GHG emissions in the CAPEX phase of your projects?
In the oil & gas industry, commitments to “net zero” emissions seemed to skyrocket in 2020. Most are focused on Scope 1 and 2 emissions, meaning the emissions consumed directly in their operations, while several leading oil & gas companies have expanded their efforts to reduce indirect Scope 3 emissions from the use of their products.
But what about reducing embedded carbon in the facilities we design and build? These Scope 3 emissions from the supply chain, including categories 1-7 in the GHG Protocol Scope 3 guidance – are often left out of decision-making. We need to begin considering the Scope 3 emissions that go into production facilities.
Image Source: GHG Protocol
In this context, both the energy and EPC industry has an opportunity to decarbonize the value chain by addressing emissions associated with the “capex” phase of building energy infrastructure. At McDermott, we are focusing on low carbon project delivery, encompassing both sustainable engineering for our customers’ operations and reducing the footprint of our own fabrication and construction activities. We are interested in the EPC project as a whole, beyond our Scope 1 and 2 reporting boundaries. In other words, we are not looking to outsource emissions from McDermott to a subcontractor or third party location but to meaningfully reduce the carbon footprint of the EPC project.
To do that, we developed a phased approach to project carbon footprint that includes:
Tracking emissions at the different locations involved in a project, such as a vessel, fabrication yard, and an office, and allocating those emissions to specific EPCI projects.
Incorporating Scope 3 emissions such as freight logistics, third party fabrication yards, and contracted vessels (2021 focus)
Integrating emissions estimates and trade-offs for embedded carbon, construction, and operations in the engineering processes early on.
net zero upstream facilities – incorporating “capex” emissions
To jumpstart this initiative, in 2020, we partnered with io consulting and Schneider Electric on a net zero upstream facility study. The study goal was to apply sustainable engineering to develop the cleanest engineered solution, including designing from a lifecycle standpoint. In addition to providing solutions for net zero platform operations, the study examined what low carbon EPCI might look like and how the supply chain can be leveraged to lower emissions in the capex phase of construction.
Based on data from the engineering study, the study estimated emissions across six key categories: steel and pipe, equipment, other materials, logistics, fabrication and construction, and marine installation, the latter accounting for the most emissions.
Image Source: McDermott
Overall, we conclude that current technology and financial constraints limit potential emissions reduction in embedded carbon and the EPC process to about 20%. This near-term reduction is possible from alternative steel and pipe suppliers using low carbon production methods; eliminating air freight; small efficiency gains in installation; and a 50% reduction in fabrication and construction emissions from incorporation of renewable energy and some alternative fuels. Furthermore, simplifying the design and reducing weight and facility footprint also contributes to embedded carbon reductions.
The future scenario estimates 80% reduction pathways in embedded carbon and EPC emissions with remaining emissions largely from marine activities and complex equipment. In this scenario, bulk materials are decarbonized, embedded carbon in equipment is cut in half, and construction emissions reduce further through technology advancement in alternative fuels and renewable energy.
challenges & opportunities
Marine Installation: Marine installation, on the offshore side of capex projects, accounts for the highest source of emissions. We are considering a few key improvements to decarbonize our marine operations by 30-50% by 2030, such as shore power connections (plugging vessels into clean energy sources when at port), upgrading our DP vessels with battery and engine technology that improves energy efficiency and reduces engine use, and exploring alternative fuels including renewable diesel applications and hydrogen fuel cells.
Current marine reduction measures are limited, and decarbonization of this sector will likely take much longer than onshore activities. Further decarbonization relies on technology advancements in batteries and fuel cells as well as supply and availability of cost-competitive alternative fuel like renewable diesel, hydrogen, or ammonia.
Complex Equipment: Weight-based proxies were used in our study, as embedded carbon data was not widely available. Schneider Electric, our partner in this study, offers environmental profiles with detailed lifecycle emissions estimates for its equipment. In this year, McDermott aims to engage our key equipment suppliers to build out our carbon footprint methodology, focused on the supply chain. As more manufacturers and raw material suppliers commit to net zero ambitions, embedded carbon in equipment can reduce significantly in coming years.
High Impact Materials: Embedded carbon figures for steel and pipe are widely available, but our study suggests emissions can vary considerably by supplier and production methods. Selecting low carbon suppliers is a means to immediately reduce embedded carbon in a facility.
Logistics: Emissions from logistics are highly sensitive to the transport mode; in other words, a small change in the amount of freight transported has a disproportionately large impact on carbon footprint. Like with marine installation, advances in shipping require continued investment and collaboration. The Clean Cargo Working Group, for example, provides emissions data for the shipping sector and collaboration around emissions reduction.
Fabrication and Construction: Though a smaller percentage of the overall embedded carbon and EPC footprint in the reference case (offshore upstream), fabrication and construction emissions are key for onshore projects and McDermott’s Scope 1 and 2 emissions. We estimate emissions can be reduced by half through efficiency measures, improved construction methods, digitalization, introduction of renewable energy, grid connections, and small-scale alternative fuels. Full decarbonization will require more financial investment in new equipment, alternative fuels, and clean energy infrastructure.
Particularly for temporary construction sites, renewable energy integration would require collaboration with local governments and clients to invest strategically in grid connections, PPAs, or onsite renewables. Modularization offers an opportunity to move work from a temporary site to a better controlled fabrication yard. However, these gains must be weighed against increases in steel or logistics for transporting modules.
Scope 3 emissions from the oil & gas value chain is an emerging topic. As oil & gas facilities decarbonize operations, embedded carbon becomes a higher percentage of lifecycle emissions. We need to bring embedded carbon into the conversation and consider our impacts in capex projects across contractors and execution methods.
Advancing decarbonization, however, will require collaboration across oil & gas developers, EPC companies, suppliers, government, and industry bodies. At McDermott, that means understanding the current capabilities in our supply chain, addressing customer specifications, and prioritizing our engagement across a large supplier base. It also means working with industry to establish clear boundaries and methodologies that facilitate true reductions, not just outsourcing of emissions to different contractors or scopes. We look forward to continuing that journey with our customers, partners, and other stakeholders.
Elizabeth Carlson, Global Head of Sustainability at McDermott: email@example.com