Using blockchain to support the energy transition
Tuesday, December 7, 2021
As the world’s race to net zero by the middle of this century gets underway, ensuring the transition away from hydrocarbons towards low-carbon sources is as sustainable as possible has become of vital importance. By harnessing the power of digital technology, the oil and gas sector can speed up emission reductions even as demand for fossil fuels continues.
Although disentangling the global economy from fossil fuels is pivotal to reaching the goals set out in the Paris Agreement, the energy transition will take time to achieve. The most recent UN climate summit – the 26th Conference of the Parties (Cop26), held in Glasgow in November – was a critical event for securing meaningful commitments to curb greenhouse gas (GHG) emissions, and for companies operating in hard-to-abate sectors, the pressure is now on to develop specific targets, policies and technologies to reduce their impact on the environment.
From extraction to processing, transportation, and distribution of fuel, the oil and gas sector is responsible for significant GHG emissions. The international maritime transport of crude oil alone accounts for approximately 114 million tonnes of CO21 each year, while overall, the industry’s operations account for 9% of all human-made (GHG) emissions2.
Keen to hit net-zero emission targets, numerous companies have pledged to prioritise spending on lower-carbon oil, ramping up investments into decarbonising their upstream activities. However, not all emissions can be avoided, especially during the transition phase towards a clean energy future. To tackle this issue, energy majors are increasingly using emission reduction projects or carbon credits to offset their operational emissions with climate action elsewhere.
Although ensuring the accurate offsetting of the oil and gas industry’s carbon emissions is challenging, technological advances mean that the sector can now measure its greenhouse gas emissions associated with the entire crude lifecycle, from wellhead through the combustion of the end products, and not only seek to offset them but also make better decisions around portfolio optimisation.
“We are all in agreement that the energy transition needs to happen, but the consumption of oil has already exceeded pre-pandemic levels, so we have to be pragmatic, and focus on mitigating the climate impact,” says Etienne Amic, CEO of VAKT.
Launched in 2018 by some of the world’s leading energy majors, the VAKT blockchain platform creates a digital link between all parties in the oil and gas ecosystem, enabling them to contribute data from trade entry to final settlement, with the data safeguarded with an immutable, distributed audit trail.
The VAKT platform lays the foundations for an eco-friendlier form of crude oil trading, whereby fossil fuel shipments can be paired with carbon offsets – a trend that has begun to take off, with 4.6 million tonnes of carbon offsets paired with hydrocarbon shipments in the first nine months of 2021 – compared to just 1.2 million in all of 2020, according to data from Trove Research3.
“However, to bundle offsets with shipments properly, you need the infrastructure to measure and calculate the carbon itself, and this needs to come from the terminal and the shipmaster and the inspector who goes onto the ship,” says Amic. “You need the quantity of the cargo, you need the grade of the fuel, and you need the methodology. For large oil and LNG traders who want to bundle carbon offsets in their physical cargoes for delivery, VAKT can provide them with that infrastructure, and thanks to the blockchain we can also ensure that when the oil is delivered, the carbon offsets are retired, in order to avoid double counting.”
As the market for hydrocarbons begins to shrink over the years to come, oil trading is set to undergo a major shift as the fossil fuel industry increasingly looks to demonstrate credible emissions mitigation strategies while promoting investments in longer-term, industrial-scale decarbonisation strategies.
Thanks to the end-to-end digitalisation offered by VAKT, the environmental impact of hydrocarbons trading can now be measured, company by company, allowing the industry to monitor and lower its emissions footprint – enabling it to become part of the solution in the race to net zero.