2025 will be a pivotal year for assessing the industry’s progress on emissions, Rystad Energy argues in a blog post on April 9. “Several corporations have set 2025 as a benchmark for achieving interim reductions in Scope 1, 2 and 3 emissions,” the analyst explains.

Rystad calculates that the 120 key energy players it analyzes generated 630 million tons of greenhouse gas emissions in 2024, accounting for 58% of the industry total. According to the firm, more than 20 of those companies had set emission reduction targets for 2025, most of which related to Scope 1 emissions from their operations or Scope 2 emissions from their supply chains.

“Several companies, based on the progress they reported, already achieved their intermediate 2025 targets back in 2023,” Rystad observes. “For example, BP, France’s TotalEnergies and U.S. gas independent Expand Energy had already surpassed their targets as of 2023. BP, in particular, had reduced its absolute emissions by 41% that year, well above the targeted 20%, while Expand exceeded its target by 14%.”

However, BP’s absolute Scope I and Scope II emissions rose 5% from 2023 to 2024. “The company attributes this increase primarily to the ramp-up or commencement of several projects in 2024, which begs the question of how long this reverse trend will continue, as the company is no longer planning to reduce its hydrocarbon output,” Rystad writes.

Looking at emissions reduction trends from 2019 to 2023, Rystad found variation across companies, including ones in the same category. “For example, within the (national oil company) group, European companies such as Equinor, OMV and MOL have substantially reduced their absolute emissions and lowered their emissions intensity,” Rystad reports. “In contrast, Russian NOCs such as Gazprom and Rosneft have increased their emissions in both metrics since 2019. Similar disparities are observed in the regional company and global independent segments, illustrating how regional factors and operational environments influence emission-reduction outcomes.”

U.S. and European majors “stand out as the best performing group,” Rystad continues. In the blog post, Rystad attributes majors’ success partly to heavy scrutiny, and points out that the companies have cut emissions through several strategies, including divestments, operational efficiency improvements, electrification, flaring reduction and methane emissions control.

Long-Term Concern

In a report on the long-term prospects for oil and gas industry decarbonization, S&P Global casts decarbonization as an important component to risk reduction. “In our view, cutting emissions now will put oil and gas producers’ credit profiles in a better position should carbon regulations tighten further,” the report says. “The sector's improved balance sheet strength over recent years should help it absorb the near-term costs of decarbonization.”

The report suggests that the long-term benefits of decarbonization will persist despite regulatory changes. “Though certain regulations have eased recently, we anticipate that pressure to decarbonize over the long term will remain, posing additional challenges for the sector,” it states.

The amount of pressure varies by region, S&P notes. “For example, near-term pressure for U.S.-based oil and gas producers to decarbonize has eased after the new U.S. administration’s announced review of climate policies, including its withdrawal from the Paris Agreement on climate change for a second time, reversal of the previous administration’s proposed methane fee, and ambition to expand domestic oil and gas production,” the firm writes. “In contrast, governments elsewhere, like in Europe, are tightening emissions-related regulations.”

The Trump administration’s policy changes are unlikely to spark huge strategic shifts from U.S. oil and gas producers, S&P assesses. “The sector’s priorities will likely remain driven by returns, commodity prices, and demand,” it says. “That said, we consider that changes in policies—and the uncertainty associated with such changes—could lead some companies to deprioritize investment and subsequently need to catch up if regulations tighten again.”

Those companies who stick with emissions reduction will “better manage potentially rising decarbonization costs and related credit risks,” S&P argues.

Emissions Targets

S&P says most of the companies it rates, which range from supermajors and NOCs to independents, have emissions targets. “Generally, their short-term targets are to reduce Scope 1 and Scope 2 emissions 20%-55% by the end of this decade,” it describes. “Longer-term aspirations target net zero by 2050. Some companies have more ambitious targets, such as achieving net-zero Scope 1 and Scope 2 emissions by 2035 or sooner.”

The near-term emissions targets should be achievable using existing technologies, including ones for eliminating routine flaring, improving leak detection and repair programs, and electrifying equipment, according to S&P.

The firm notes that both drilling and hydraulic fracturing can reduce emissions by displacing diesel through electrification, dual-fuel engines or natural gas engines. S&P estimates that replacing diesel drilling rigs with ones powered by electricity, natural gas or other alternative fuels will cut rig emissions by 30%-50%. For fracturing fleets, that change would yield 30%-70% reductions.

Some emissions reductions will come as part of efficiency gains. As an example, S&P points to optimizing drilling techniques using AI and real-time data.

While existing technologies may be adequate to meet near-term targets, S&P predicts that decarbonization will ultimately require new technologies. This is reflected in the strategies of the companies it covers.

“Longer-term targets tend to rely more heavily on offsetting emissions through nature-based solutions and technologies,” S&P reports. “These include carbon capture and storage (CCS), as well as the development of clean energy, carbon credit markets, and the advancement of new technologies such as green hydrogen production.”

Carbon capture is costly and difficult to implement at scale, S&P acknowledges. Even so, many of the companies it rates have included CCS in their decarbonization plans. Some, such as ExxonMobil, are already investing in it.

“We believe oil and gas producers are well positioned to leverage their expertise in drilling, carbon transport, and managing large projects to develop CCUS or CCS facilities,” S&P comments. “We are nevertheless mindful of several impediments to widespread CCUS adoption, including its high cost, technological barriers, and lack of a cohesive policy framework. We therefore don’t foresee deployment at scale before the end of this decade.”

Ultimately, S&P calls the upstream oil and gas sector’s long-term decarbonization prospects uncertain. “Although the intensity of emissions may decrease further, the reduction of absolute emissions could be more difficult, since demand for oil and gas is expected to remain robust in the coming decade,” it says. “In addition, longer-term net zero goals will require substantial investment in technologies that are not yet fully scalable.”

In the short term, S&P expresses confidence that rated oil and gas producers will achieve near-term voluntary emissions reduction goals by implementing relatively affordable improvements. “We expect most would have sufficient capacity to absorb an increase in regulation-related costs or pass them on if they were to occur,” S&P adds. “Nevertheless, the risks of climate-related litigation, pricing premiums, and funding are areas to watch if other sectors and stakeholders prioritize their own decarbonization strategies.”

The full report, Decarbonizing Oil And Gas Production Faces Long-Term Hurdles After Short-Term Gains, includes more details on the mechanisms through which carbon reduction can influence credit ratings and why some companies may be more resilient to those risks, as well as tables summarizing the emissions reductions and costs associated with various decarbonization strategies.