EMSD6017 Environmental Management: Sustainable Oil and Gas Report

This report provides a detailed analysis of sustainability within the oil and gas industry, examining the upstream, midstream, and downstream stages of production. It highlights the environmental impacts of traditional practices and explores the implementation of sustainable methods, including green supply chain management, lean management, and technological innovations aimed at reducing emissions and waste. The report also discusses the challenges faced by oil and gas companies in adopting sustainable practices and the potential benefits, such as improved operational efficiency, enhanced public image, and reduced environmental risks. Case studies of companies like BP, Shell, and ExxonMobil illustrate the application of sustainability initiatives. Ultimately, the report emphasizes the importance of sustainable development for the long-term viability of the oil and gas industry and the protection of the environment for future generations.

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Table of Contents
1.0 Introduction..........................................................................................................................2
2.0 Sustainability in three stages of oil and gas production.......................................................2
2.1 Upstream Stage.............................................................................................................3
2.2 Midstream Stage...............................................................................................................4
2.3 Downstream Stage...........................................................................................................5
3.0 Impacts of sustainability on the oil and gas companies and the environment.....................5
4.0 Challenges in oil and gas companies...................................................................................8
4.1 During implementation of sustainable methods...............................................................8
4.2 After the implementation of sustainable methods............................................................9
5.0 Sustainability and sustainable development in present and future.....................................10
6.0 Conclusion..........................................................................................................................12
References................................................................................................................................14

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1.0 Introduction
Environmental protection and preservation of natural resources is one of the major
concerns in the recent years for oil and gas companies. The production of oil and gas has led
to severe environmental crisis and climatic changes which has caused grave repercussions for
the society. Majority of the oil and gas companies have been accused for causing disorder to
the surrounding environment. This is the reason that they have been facing issues of
reliability issues from the public and the policy makers in the industry. There has been
various incidents in the past which has made people rethink about the usage of fossil fuel. For
instance, the Deep water Horizon Disaster in the Mexican Gulf in the year of 2010 and Santa
Barbara oil spill in the year of 1969 have developed a negative mentality in the minds of the
people from all over the world (Gros et al. 2014). This has resulted in seeking and
developing of sustainable practices in the oil and gas industry so that further degradation of
the environment can be prevented. The need for sustainability among all the companies in oil
and gas industry aims to meet the current needs of the population by upholding the prospect
of the future generation.
2.0 Sustainability in three stages of oil and gas production
Sustainability in the oil and natural gas industry can be understand only by evaluating
the different stages of supply chain in oil and gas production. The evaluation of the structure
of the industry is critical to highlight the role of oil and gas businesses in modern industry.
There are mainly three segregations of oil and gas process and they are upstream, midstream
and downstream. The upstream process consists of exploration and production where off-
shore and on-shore crude oil are searched for (Yusuf et al. 2014). The midstream and
downstream sectors are the supplements of the upstream process. The midstream deals with
the transportation of storage of crude oil after extraction and the downstream deals with
distribution and refining of the natural gas and crude oil.
Figure 1: Supply chain activities of oil and gas organizations

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Source: (Yusuf et al. 2014)
2.1 Upstream Stage
The above diagram clearly depicts the activities in the supply chain of the every oil and
gas organization. Therefore, implementation of sustainability practices within the supply
chain and development of green supply chain management is crucial for the sustainable
approach to oil and gas production. Green approaches to management of upstream is used for
cost reduction by efficient use of available resources. Environmental issues need to be
incorporated within supply chain management to facilitate sustainable development in
business. As stated by Abdulrahman, Huisingh and Hafkamp (2015), green management can
be defined as the process of including environmental perspective into manufacturing
processes, material sourcing, product development and delivery. The major green
management practices to be incorporated into upstream supply chain context are as follows:
 Joint planning to forestall and resolve issues related to ecology
 Minimization of logistical influence of material flow by developing cooperation
agreement between organizations
 Collaborating with the suppliers for developing environmental perspective
 Monitoring of the environmental activities of the suppliers
 Providing environmental requirements in design specifications to the suppliers
 ISO 14000 certification for all the suppliers
 Green purchasing
 Elimination of environmental impact of products by working jointly with suppliers
and product designers
Meanwhile, lean management is used to add value to the production by reduction
wastage of materials at every stage of production. Ruedel et al. (2017) stated lean
management is critical for integrating all the downstream and upstream activities to
reduce the variation in demand by streamlining, optimizing, creating and simplifying
capabilities by using effective modern systems. Therefore, in order to develop
sustainable practices by using lean management, following tools are recommended:
 Just in time (JIT)
 Consolidation of resources
 Outsourcing production
 Supplier involvement in development of product

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 Supplier certification
 Materials delivery
Laszlo and Zhexembayeva (2017) stated an example where a particular company
reduced their solid waste drastically by working closely with their chemical suppliers. While
dealing with environmental sustainability within organizations different dimensions and
indicators are considered such as solid waste, air emission, and consumption of toxic and
hazardous, inventory levels, capacity utilization and inventory costs. Social sustainability is
another aspect of green management which consist of supplier screening, local suppliers and
corruption risk (Ahmad et al. 2016). In order to develop effective sustainability measures,
supply chain of different organizations have to be considered to develop effective
sustainability strategies. Purchasing management, supplier selection criteria, supplier
requirement and monitoring of performance of the suppliers are critical for managing
upstream processes in organizations.
2.2 Midstream Stage
The midstream activities mainly consists of storage and transportation activities
through truck, rail and pipelines (Wan Ahmad, de Brito and Tavasszy 2016). The
transportation of goods from different phases has the highest impact on the industry. There
reduction in air quality and increase in greenhouse gases is one of the major concerns. This
results in the accidental leaks, explosions and spills from ship tankers, railroads and pipelines.
Therefore, pipelines are to be constructed by keeping in mind the environmental and safety
standards prescribed by the industry associations and regulatory industries (Wan Ahmad, de
Brito and Tavasszy 2016). In order to maintain the safety of the workers and pipelines,
periodical testing is required to measure internal corrosion and deposit. Welds have to be
checked with gamma radiation and visually to identify defects. The use of plastic pipelines
can also be used to easily manage pipelines due to its light weight. Creation of electrostatic
arc are minimized by grounding the pipes and de-energizing cathodic rectifiers. Moreover,
pipelines need to be coated to check for preventing and use of cathodic electrical protection is
effective in such conditions (Ahmad et al. 2017). Hydrostatical testing of each of all the
pipelines need to be conducted to make sure regularity in oil and gas flow. These processes
needs to be carried out on regular basis to make sure that all the safety measures are intact
and working so that any accident or leakage can be prevented.

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2.3 Downstream Stage
The downstream processes as stated above consists of the refining and distribution of
oil and gas. The environmental operating permits is a key factor for all the refineries. Barata
et al. (2014) states that organizations need to be accountable for the amount of pollutant
release in both air and water. Refinery operations have led to generation of hazardous waste,
ozone depleting substances, toxic pollutants, greenhouse and waste water discharges. It is
critical for modern refineries to use their technological advancement to reduce the emission
of harmful gas and waste materials by recycling. The organizations have to adapt to the
stringent changes to the laws and regulations in the industry due to the development of new
control technologies. The analysis of the sustainability measures and requirement of
sustainability in these three stages of oil and gas production shows that organizations need to
be more responsible in protecting the surrounding environment (Laszlo and Zhexembayeva
2017). There has been mishaps, accidents and organizational failures in every stage of oil and
gas product development which shows that safety and regulatory standards have to be kept at
highest possible standard (Raut, Narkhede and Gardas 2017). This will facilitate in reducing
the harmful impact of the organization on the corresponding society and the environment
significantly. The organization will have to be visionary in accepting and developing
technologies that would secure the future of the next generation by developing sustainable
strategies. Non-renewable sources of energy are perishable in nature so companies need to
develop methods to preserve the sustainability of oil and gas companies by implementing
triple bottom so that the world can have cheaper access to energy resources.
3.0 Impacts of sustainability on the oil and gas companies and the
environment
George et al. (2016) states that oil and gas companies in the world have been moving
towards sustainability measures. The competition level in the market has increased due to the
fluctuation of energy prices which makes it risky to develop measures for sustainable
development. Sustainability practices within organization access results in the development
of safety, health and social policies. The incorporation of sustainability practices have
facilitated in minimizing the harmful impact of the operation of the organizations on the
society and the environment. Kirat (2015) opined that nexus of performance, risk and
innovation has been the key to transforming the operational practices within different
organizations. This resulted in better use of data by different organizations. The
implementation of the data analytics systems has been able to improve the overall

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effectiveness of the process by reducing the operational complexity and enhancing the
production potential.
As stated by Wang et al. (2014), digital future provides ample amount of
opportunities to the companies to gather the existing data to transform processes, reconfigure
value chains and products. Moreover, Silvestre (2015) argued that use of effective analytical
tools can reduce bottlenecks, wastage and accidents by increasing the production by 30-50
times. This facilitates in developing operational excellence and continuous risk assessment to
prevent errors. The majority of the refineries, extraction and transportation have ageing
assets and effective maintenance of these assets is critical for sustainable development.
Similarly, the use of HSES baseline compliance, material risks and integration with the daily
processes results value processes that can be measured. The use of sustainable transportation
strategy and supply chain is also essential as sustainability at all levels of the organizational
processes will results in fulfilment of sustainability practices within the organization. For
instance, BP had implemented a system for managing operations which incorporated the
safety, health and environmental, operational reliability, social responsibility and contractor
management. This was a remedial measure after the biggest mishap in the history of oil and
gas companies, which is the Deep Horizon blast (Griffin et al. 2014). This was aimed to
reduce the environment impact of the operation of the organization on the surrounding
environment. The company was also introduced a program named WELLSAFE which was
aimed to reduce the amount of oil spill during drilling operations. Moreover, this has been
used to further educate the employees regarding the working environment of the
organization.
Similarly, Shell has been instrumental in committing to policies that addresses the
security, environment and health framework. This social and environmental framework has
been developed to protect the environment and people (Unerman and Zappettini 2014). This
makes sure that all the contractors, companies and joint ventures are following this
framework to align their goals. ExxonMobil has developed a technology to contribute to the
environmental sustainability. They have developed a fast drill which has increased the
drilling speed by 80% and reduced the amount of fuel consumption during the process
(ExxonMobil 2019). This facilitates in less amount of contamination in air due to the
different drilling activities. Everley (2015) states that water is a necessary element of
operation in oil production process starting from fracking to separating oil for the presence of
other components in oil sands. Production processes requires millions of barrels of water on

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daily basis and majority of the companies are able to recycle the water by use of
technological innovation. However, many companies have taken up approaches to reduce the
use of fresh water and aiming to innovate their extraction processes. Apache, is an operator in
United States that has been using brackish and recycled water for fracking and drilling
operations (Everley 2015). Similarly, Pioneer Natural Resources have been purchasing waste
water for local operations of oil and gas extraction. Water recycling was not cost efficient in
initial phases of the operations for many companies but they have become the industry
leaders by using technological development to improve the efficiency of their water recycling
processes.
This shows that majority of the companies have been exploring different ways to
reuse and recycle water for effective operations and decrease the use of freshwater. The use
of improved filtration and oxidisation method has facilitated in using 100% non-potable
water (Everley 2015). Moreover, the use of chemical-free treatment of water has resulted in
reduction of bacteria. As stated by Ali et al. (2015), pipeline transportation is one of the
major concerns for organization and has caused instances of leakage. The current reports
have shown that it is possible to reduce the amount of leakage of methane by using cost
effective measures comprising of emerging technology. The major oil and gas companies in
the world have signed a pledge called guiding principles. These principle was aimed to
reduce the amount of emission of methane to a quarter of the total production by the end of
2025 (Stone 2018). This consisted of companies like Shell, Equinor, ExxonMobil, BP and
Chevron. Moreover, the continuous efforts from these oil and gas companies have been able
to reduce the emission of methane by 14% since 1990 (Stone 2018).
Meanwhile, the use of used oil by recycling is another effort taken by the most of the
companies where they have utilizing the waste-oil micro refinery units top convert waste oil
into diesel fuel. This has facilitated in using the waste oil for ongoing operations in the oil
production and is more effective and inefficient when compared to the traditional alternatives
of oil disposal. Companies like ExxonMobil has been able to use these methods to
completely waste oil to use it in their refineries. Innovation can implemented in overall
processes to reduce the cost of the processes even though they are not contributing the
making the processing cleaner and greener (US EPA 2019). The use of ultrasound technology
has facilitated the companies in the oil and gas industry to develop images in 3D of oil wells
and their insides which helps in making process decisions that are more cost effective in
nature. This will facilitate in reduction of overall cost and use of excess energy resources

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which in turn has reduced the carbon footprint. Digital oilfield is another impact of
sustainability on oil and gas industries which has been coming into prominence and would
help in reducing the environmental impact due to the operations of the oil and gas companies
(US EPA 2019). Cloud technology is used in this process to monitor all the operational data
along with analysis of the data in real time. This facilitates in creating a safer and sustainable
processes having minimum impact on the society and its surrounding environment.
4.0 Challenges in oil and gas companies
The petroleum industry has faced complex challenges over the past decades. The
companies are faced between the dilemmas where they are trying to increase the demand of
energy products but at the same time are trying to reduce the amount of carbon footprint and
adhere to the social responsibilities and environment laws (Klass and Meinhardt 2014). The
oil and gas companies face challenges in while implementing sustainable methods and at the
same time after the implementation of sustainable methods.
4.1 During implementation of sustainable methods
The major challenges which affects the companies while implementing sustainable
measures are as follows:
 Price fluctuation
 Complexity in production and drilling process
 Increase in pressure on the management level officials by the shareholders and
investors as they are more focused value creation instead due to the low return on
investments.
 Exponential increase in the demand of energy product in most countries.
 Corporate social responsibility and social license protection
 Critical importance of HSE compliance and it has increased in the current
environment which affects volatility of market prices and cost effectiveness
 Variation of fiscal regimes
 Innovation
 Research and Development
 Knowledge management and handling of data which is growing
The above mentioned challenges are factors that hits the major oil and gas companies
while implementing sustainable development measures (Rui et al. 2017). These above
factors are related to other aspect of the excluding the production processes of the oil and gas

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companies. The inclusion of the production process of oil and gas companies the major
challenges to sustainable development of the organization are classified as follows:
 Managing fluids and drilling muds
 Venting and flaring
 Decommissioning installation of oil and gas
 Disposable of oil storage tank
 Treatment and disposable of produced water
 Subsidence
 Validation and emission of greenhouse gases
 Safety
 Spills
 Enhanced profitability
These above factors have resulted in the creation of environmental crises and challenges
in the past. The major oil and gas companies in the world has been able to develop measures
to mitigate these challenges by incorporation of new technologies and policies for the welfare
of the indigenous people around production facilities. The above mentioned factors are
critical challenges faced by the companies while implementing sustainable measures
(Ngoasong 2014). The stakeholders are oriented towards achieving productivity and social
responsibility at the same which acts as a challenges for the companies working in the oil and
gas companies. This means that organizations need to do their business differently if they
want to attain both sustainability and profitability. The fluctuation of prices has increase the
competition level in the industry and reduces the prices. This has led to the increase in the
risk prospects in terms of implementing sustainable measures due to the increase in
investment costs.
4.2 After the implementation of sustainable methods
The implementation of the sustainability methods are not sufficient to make sure that
there is significant decrease in environmental and social impact due to the new methods.
However, these methods need to be monitored on daily basis to make sure that all the
processes are going as planned. These processes are relatively new and all the employees
need to be provided adequate training to handle the new processes effectively. Berkowitz,
Bucheliand Dumez (2017) states that the major challenge faced by the organization after
implementation of sustainable measures is making the measures profitable. This has to be

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done in order to protect the interest of the stakeholders and at the same time protecting the
corresponding environment and society. The sustainability goals and the profitability goals
need to go hand in hand in order to achieve both sustainable development goals and
profitability goals. The increase in production cost due to the implementation of the
sustainable measures has affected the expectation of the shareholders (George et al. 2016).
The increase in production cost due to the increase in the stringency of rules and regulation
global operation. Shareholders consider economic gain to be the highest priority and expect
significant increase in profit margin. Regional trade pattern, escalation in completion,
increasing in population and global change in climatic conditions are critical factors affecting
the sustainability of the businesses after the completion of the business. Therefore, it has
become one of the priorities for the organizations to identify the sustainable drivers in the
industry so that they can develop processes for increasing the production efficiency by
reducing the production cost. This is the reason that the global companies are aiming to
improving the consistency and comprehensiveness of their plans so that they can examine,
identify and mitigate the sustainability drivers that would affect the business of the
organization.
5.0 Sustainability and sustainable development in present and future
The united nation general assembly has generated an agenda to develop the
sustainable goals for the organizations from all over the world in seeking consensus till 2030
(Bruinsma 2017). UN has developed 17 sustainable goals that have affected the
environmental, social and economic aspect of the organization. Therefore, it has been the
responsibility of different organizations in the oil and gas industry to identify the criteria that
are relevant to their business priorities, impacts and activities. Schaltegger, Hansen and
Lüdeke-Freund (2016) states that oil and gas companies need to be more responsible for their
role in reducing their environmental and social impact. Therefore, it is essential for the
companies to examine the ways they can integrate the sustainable development goals. As
stated by Bebbington, Unerman and O’DWYER (2014), companies need to go beyond
corporate philanthropy and social investment. The involvement of all the employees and
strong corporate leadership sis required to incorporate all the factor responsible for achieving
the sustainable development goals. Dyllick and Muff (2016) states that realization of
sustainable development goals requires shared understanding on the part of the shareholders
so that business goals and value creation can be aligned. In order to accommodate
sustainable development goals, it is critical to incorporate them into the processes, policies

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and corporate system of the organization. This includes aspects such as company policies,
standards, management systems, research and development, engagement with surrounding
communities, risk assessment, reporting and project due diligence.
Beske, Land and Seuring (2014) argued that it is essential to collaborate with the
stakeholders so that the impact can be broadened and the leveraging ability is enhanced to
fulfil the sustainable development goals. However, achieving sustainable development goals
is beyond the capability of a single business entity and multiple stakeholders have to
collaborate to address the sustainable development goals. As stated by Gualandris et al.
(2015), government in all the countries should be active in implementing sustainable
development goals by developing environment, regulations and framework that facilitates
companies in addressing the SDG goals. The oil and gas companies have to adhere to the
rules and regulations to minimize impact on the environment and society. The contractors and
suppliers have to follow the same environmental and social frameworks followed by the
companies so that green and sustainable supply chain can be developed (Wang et al. 2014).
The participation of the local communities, development partners, institutional investors and
trusts have to be increased significantly for achieving sustainable supply chain. The
companies in the oil and gas industry are already progression in terms of sustainable
development goals and many examples have been shared which shows that companies are
moving towards developing sustainable practices. However, these companies are far from
reaching their original goals.
Owusu and Asumadu-Sarkodie (2016) states that there are still handful of companies
that have addressing the sustainability issues and moving towards sustainable development
goals. Apache, is an operator in United States that has been using brackish and recycled water
for fracking and drilling operations. Similarly, Pioneer Natural Resources have been
purchasing waste water for local operations of oil and gas extraction. This shows that
companies are making efforts to reduce the harmful impact of their operations on the
environment and society. According to Utebor (2017), Shell has contributed significant since
their arrival in Nigeria but have received blockage in their operations. Vandalism and oil
bunkering are issues faced by the company in Nigeria and the indigenous people have blamed
them for their lack of improvement. These instances need to change and cooperation between
the companies and the local community is one of the key areas where companies are lagging
behind.