Petronas to adopt a ‘progressive’ approach in managing Scope 3 emissions

The Malaysian oil and gas company currently does not account for Scope 3 emissions in its aspiration to achieve net-zero carbon emissions by 2050.

Petronas Twin Towers at night
The Petronas Twin Towers in Kuala Lumpur, Malaysia. Petronas has set a target of achieving net zero carbon emissions by 2050. Image: Vlad Shapochnikov via Unsplash

Petronas will address the company’s Scope 3 emissions in phases, according to the Malaysian oil and gas giant’s head of strategy, policy and regulation and corporate sustainability, Wan Sayuti Wan Hussin.

In 2020, Petronas announced its target to become net zero by 2050, becoming the first oil and gas company in Southeast Asia to do so. However, the “aspirational” target did not include the fossil fuel major’s Scope 3, or full value chain emissions. 

Wan Sayuti was speaking at the question and answer portion of a knowledge sharing session titled “Towards Net Zero: A Sustainability Talk with Petronas”. The event was organised by Petronas for members of the media.

The other speakers at the talk were Charlotte Wolff-Bye, the chief sustainability officer of Petronas, and Masayu M. Husain, the head of performance and reporting, corporate sustainability at Petronas.

Responding to a question on how Petronas’s net zero ambition is aligned with the Paris Agreement, Wan Sayuti said: “There are components [in Petronas’s net zero pathway] that are definitely anchored in climate science to make sure the portfolio is robust enough to be tested against the 1.5 degrees and 2 degrees [scenario].” He added: “But there are also components, such as Scope 3, where we are taking a stepped approach [in addressing it].”

The targets set in Petronas’s Pathway to Net Zero Carbon Emissions 2050, as well as the greenhouse gas emissions reduction it has reported, only extend across Scope 1 (direct emissions from sources owned or controlled by a company) and Scope 2 (indirect emissions from purchased electricity).

Scope 3 includes all other indirect emissions generated in the upstream and downstream activities of a company. 

For many organisations, Scope 3 accounts for the majority of its total greenhouse gas emissions, and is the most challenging to measure and reduce. Scope 3 emissions account for 80-to-95 per cent of total carbon emissions from oil and gas companies, according to Wood Mackenzie, an energy consultancy.

“Scope 3 is beyond the value chain. It requires the whole ecosystem [to] change,” said Wan Sayuti. For scope 3 emissions, Petronas plans to prioritise Category 11 - “use of sold products”, which covers emissions from sold services and goods by the reporting organisation.

In 2021 Petronas recorded a total of 45.2 million tonnes of carbon dioxide equivalent (MtCO2e) across its global operations. It plans to cap its emissions at 49.5 MtCO2e by 2024 for Scope 1 and Scope 2 emissions in its Malaysia operations.

Preparing for the low carbon economy

Malaysia has long been reliant on the oil and gas sector as a source of revenue to underpin its growth and fulfil its aspirations of becoming a developed and high-income country. Since 1976, Petronas has contributed nearly RM1.2 trillion (US$295 billion) to the Federal Government of Malaysia.

“There’s no development without energy, you must have energy and everything else flows from that,” said Wolff-Bye.

The challenge for Petronas moving forward will be to navigate the energy transition as the world shifts from fossil fuels to clean energy.  

“The energy transition is here, but it is not moving fast enough, because emissions continue to rise,” said Wolff-Bye. She added that it is important to decouple economic growth from emissions growth, and Petronas is focusing on reducing its emissions.

According to Wan Sayuti, Petronas has closely studied the North Sea Transition Deal (NSTD), on how the British government is working together with oil and gas players to transition into the low carbon and green economy. “[The NSTD] didn’t say to scrap oil and gas. In the energy mix of the future it [oil and gas] is still there, we just have to manage emissions better,” said Wan Sayuti. “At the same time we have to prepare skills for the new economy and make sure no one is left behind.”

Petronas has set an interim target of reducing group-wide greenhouse gas emissions by 25 per cent by 2030. Wan Sayuti said that the goal was developed based on existing technology, but could change depending on developments. “We will continue to revisit and ratchet up targets, especially when we have technological breakthroughs in CCS (carbon capture and storage) and hydrogen,” said Wan Sayuti.

The company plans to adopt CCS in its high carbon dioxide fields, beginning with its Kasawari Gas Field project off the coast of the Malaysian state of Sarawak, which is expected to commence in 2026. The Kawasari carbon capture and storage project is estimated to reduce as much as 3.3 MtCO2e annually, making it one of the largest offshore CCS projects in the world.

“The way we produce energy has to be different, it has to be low carbon and that opens up opportunities for new technology,” said Wan Sayuti.

Apart from investing in carbon capture and storage, Petronas is also developing solutions for renewable energy, energy efficiency and has pledged to avoid routine flaring in new oil field developments and end routing flaring at existing oil production sites by 2030.

Gas flaring reduction is important in combating climate change as routine flaring releases millions of tonnes of carbon into the atmosphere, and also wastes a valuable energy resource.

Petronas has recently ramped up its sustainability efforts. In 2022, it joined the Oil and Gas Methane Partnership 2.0 and established Gentari Sdn Bhd (Gentari), its clean energy subsidiary that aims to boost renewable energy capacity, produce clean hydrogen projects and make inroads into the electric vehicle ecosystem.

In April 2023, Petronas signed a memorandum of collaboration with Bursa Malaysia, the stock exchange of Malaysia, to help drive ESG adoption through the exchange’s Centralised Sustainability Intelligence Platform. Co-developed by Bursa Malaysia and the London Stock Exchange Group, the platform will allow companies and their suppliers to calculate carbon emissions impact and disclose standardised ESG data.

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