How is OFS Responding to the ESG Concerns of Producers?

The importance of ESG to the oil and gas industry continues to grow. E&P companies, in particular, are often in the spotlight because of new ESG targets, especially on the environmental side and often related to decarbonization. However, the increased focus on ESG is also playing out in the oilfield services (OFS) sector.

“Services firms face similar pressures on ESG and climate-risk concerns from investors as their upstream partners and customers, but they are slightly differently positioned,” Alex Martinos, Energy Intelligence’s director of energy transition research, told Hart Energy. “We see oilfield service firms as arguably being more exposed to transition pressures than other industry segments. Being acutely exposed to front-loaded, capex-intensive industry spending, OFS firms are likely to feel the squeeze from an evolution in industry priorities well before upstream/downstream segments, which could continue to profitably ‘harvest’ existing assets for decades to come, even if new project spending dries up.”

“We see oilfield service firms as arguably being more exposed to transition pressures than other industry segments.”—Alex Martinos, Energy Intelligence

Large and small OFS players alike are figuring out how best to respond to and anticipate producers’ changing ESG concerns. Approaches may differ, but ultimately OFS firms’ goals when it comes to balancing decarbonization with overall performance are the same.

Halliburton’s sustainability targets

Halliburton, one of the world’s largest OFS firms along with Schlumberger and Baker Hughes, is pursuing sustainability targets including a 40% reduction in Scope 1 and 2 greenhouse-gas emissions by 2035.

“We continuously assess our targets, but we will only set targets that [are] actionable, measurable plans supported,” Halliburton’s director of global stewardship and sustainability, Andres Cabada, told Hart Energy. “On other ESG topics, we push ourselves to be better every year.”

The company views its ESG targets and those of its customers as being complementary.

“While we have our own targets, we can help our customers achieve theirs through collaboration to implement the best solutions to their challenges,” Cabada said. “Specifically, we can help reduce their carbon footprint and see opportunities to reduce their emissions beyond those generated on site by Halliburton.”

“We believe there is an opportunity to streamline the reporting frameworks and agree on some basic rules, both within the oil and gas industry as well as at a macro level.”—Andres Cabada, Halliburton

The environmental component of ESG tends to dominate discussions, but Cabada cited other areas Halliburton seeks to focus on, including corporate governance, diversity, equity and inclusion, and human rights.

“We align with our customers on priorities and opportunities for collaboration in those areas,” he said. “For example, we help local economies prosper by nationalizing our workforce, providing effective training and education, and engaging with local suppliers.”

Halliburton sees its electric and Tier 4 dual fuel hydraulic fracturing equipment and the emission reduction it helps drive in the North American shale industry as one example of how its operations are yielding results on the ESG front.

“As a market leader, we can have an outsized positive impact on this end,” Cabada said.

There are still further challenges to overcome on the ESG front, but Cabada sees them as opportunities for the industry to do better.

“We believe there is an opportunity to streamline the reporting frameworks and agree on some basic rules, both within the oil and gas industry as well as at a macro level,” he said.

Baker Hughes’ net-zero commitments

Baker Hughes says it is trying to lead the way in the OFS sector when it comes to ESG. This includes pursuing net-zero emissions by 2050.

“We were one of the first companies in our sector to make a net-zero carbon commitment and have defined a pathway to reduce our operational emissions,” Allyson Book, Baker Hughes’ vice president of energy transition, told Hart Energy. “Since then, we have actively worked to set annual performance indicators to demonstrate progress, while shoring up our data collection and reporting capabilities in this space. In 2020 we reduced our operational emissions by 15% versus prior year.”

Book said Baker Hughes challenges itself to perform on a par with the most responsible companies in the world, not necessarily just the OFS sector. She added, though, that the company also pays close attention to the goals and progress of its customers.

“One example is our recent strategic collaboration agreement with Shell, where we are providing low-carbon technology solutions to Shell in exchange for more renewable energy solutions,” Book said. “In this way, we accelerate and closely support each other’s net-zero carbon emissions goals.”

Like Halliburton, Baker Hughes understands the importance of pursuing improvements more broadly across all areas covered by ESG.

“We cannot achieve net-zero emissions without operationalizing sustainable business practices—across all facets of ESG.”—Allyson Book, Baker Hughes 

“There is a lot of attention and coverage on the environmental component of ESG in recent times, but we cannot achieve net-zero emissions without operationalizing sustainable business practices—across all facets of ESG,” Book said.

The company’s approach involved embedding ESG goals into everyday actions, which Book described as “a difficult task that goes well beyond target setting.” She also cautioned about the danger of viewing the energy transition as a binary concept, broken down into “good” and “bad” forms of energy.

“The true focus needs to be on emissions reductions,” she said. “How do we get to a lower-carbon economy that is still safe and affordable to use, regardless of fuel type?”

Evolution Well Services’ e-frac solution  

The case of Evolution Well Services, a specialist in electric fracturing, illustrates how companies that specialize in a particular area of OFS are responding to producers’ ESG concerns.

“Our aero-derivative turbines run on 100% field gas, offering a lower carbon fuel source to power hydraulic fracturing operations, while providing unparalleled fuel savings to our customers through the elimination of conventional diesel-powered equipment,” Evolution’s director of business development, Keith Myers, told Hart Energy. “In addition to reducing the carbon intensity of operations, our electric fracturing solution requires significantly less equipment, improves safety and provides a quieter operation when compared with conventional equipment.”

According to Myers, interest in the company’s technology is at an all-time high.

“We are seeing E&Ps target electrification throughout their entire operations, not solely hydraulic fracturing,” Myers said. “Evolution is partnered with some of the most forward-looking and innovative E&Ps in the industry, and this is highlighted by their decision to be early adopters of electric fracturing. Within these partnerships, we always seek to align both operational and ESG targets with our partners.”

“We are seeing E&Ps target electrification throughout their entire operations, not solely hydraulic fracturing.”—Keith Myers, Evolution Well Services

Evolution sees the fact that it has spent several years honing its expertise in an industry where introducing new technologies can be challenging as a competitive advantage.

“E&Ps cannot sacrifice performance in the journey for reduced emissions, and by selecting the most experienced service company, E&Ps gain certainty with their ability to reduce emissions and operate efficiently,” Myers added.

The company sees maintaining performance standards while simultaneously reducing the environmental impact of operations as a key challenge for the OFS sector. However, it is optimistic for the future and the role ESG will play.

“As the shale revolution unlocked reserves that were previously thought to be inaccessible, the ESG revolution will spur innovation that will enable E&Ps to produce the oil and natural gas required to fuel increasing energy demand while achieving meaningful ESG targets,” Myers said.

Top priority

Looking ahead, E&Ps will need to focus increasingly on striking a balance between sustainability and meeting global energy needs.

“The wider question of how the industry balances long-run climate/ESG goals with meeting oil and gas demand—still rising in the short term—now tops the industry agenda,” Energy Intelligence’s Martinos said.

Previous forecasts of peak oil demand appear to have been premature as consumption rises again. In this environment, help from OFS firms on balancing decarbonization while meeting growing needs will be particularly welcome.