The circular economy and sustainable supply chain in oil & gas sector is transforming the industry’s approach. Traditionally, oil and gas operations followed a linear model: extract, use, and dispose. This method led to resource depletion, environmental degradation, and increased greenhouse gas emissions. However, the integration of circular economy in oil & gas sector is helping companies minimize waste, maximize efficiency, and drive sustainability not only in operations but also in the supply chain.
Understanding the Circular Economy in Oil & Gas:
The circular economy in the oil & gas sector aims to extend the life cycle of resources, reduce waste, and promote material reuse. By repurposing by-products, optimizing operations, and adopting closed-loop systems, companies can significantly improve their supply chain and lower their environmental footprints. Similarly, waste minimization strategies, such as material recovery, drilling fluid recycling, and water reuse in operations, support companies’ sustainability and circular economy targets.
Globally, oil and gas firms are implementing circular economy initiatives. In the USA, several oil and gas companies participate in the Rigs-to-Reefs program. They transform decommissioned offshore rigs into artificial reefs that enhance marine habitats while reducing removal costs. In Europe, companies have adopted circular supply chains to reduce waste and repurpose materials. Meanwhile, businesses in North America and Asia are exploring alternative revenue streams by recovering and reusing oil sludge.
Key Circular Economy Strategies in Oil & Gas Sector:
- Waste Minimization: Companies are optimizing operations to reduce waste production at the source. Shell has deployed digital twin systems for drilling operations. Digital twins simulate drilling behavior and help adjust parameters to reduce waste and energy use. Similarly, real-time sensors and predictive maintenance methodologies prevent inefficiencies that lead to material losses.
- Resource Recovery: Technologies such as waste-to-energy and flared gas recovery are being used to convert waste materials into usable energy. Equinor has upgraded its flared gas recovery process with automated sensors and control systems. In this process, the recovered gas is redirected for energy generation or reinjected into reservoirs.
- Closed-Loop Systems: Closed-loop systems recycle the spent catalysts and refine by-products into new materials ensuring that fewer resources are extracted from the environment. TotalEnergies has established closed-loop systems that capture COâ‚‚ and sulfur compounds. These compounds are repurposed in other industrial processes. Collectively, this process reduces the demand for raw materials and lowers COâ‚‚ emissions.
- Alternative Materials and Energy Use: To incorporate circular economy and sustainability approaches, oil industries are transitioning to bio-based lubricants and low-carbon fuels to enhance sustainability.
Business Benefits of a Circular Economy:
The adoption of circular economy principles in oil & gas sector not only benefits the supply chain and environment but also presents financial advantages. Companies can lower operational costs by reducing waste disposal expenses and improving resource efficiency. One of the examples is Veoli which provides solutions in water, waste, and energy. Veolia’s KOH recovery services saved refinery clients over $20 million in five years. This was achieved by recycling and returning 95% of spent KOH for reuse, reducing the need for new chemical procurement. Furthermore, adherence to circular economy strategies helps firms comply with environmental regulations, and avoids costly fines and reputational damage.
Business Ethics: Labor Ethics in the Oil & Gas Industry:
The oil & gas sector faces challenges regarding labor ethics, particularly in developing regions. Employees often work in hazardous conditions with inadequate safety measures. Companies must ensure fair wages, worker safety, and ethical recruitment practices. By integrating ethical labor policies, firms can not only comply with regulations but can also foster a more productive workforce.
Environmental Justice in the Oil & Gas Sector:
Environmental justice is another major aspect of circular economy in oil and gas sector, as communities near drilling sites often suffer from pollution and resource depletion. Companies must prioritize responsible waste disposal, air quality management, and community engagement to mitigate negative impacts.
Beyond surrounding communities, the oil and gas sector also possesses a huge responsibility for global COâ‚‚ emissions. According to the International Energy Agency (IEA), oil and gas industries are responsible for approximately 15% of the world’s energy-related emissions, the equivalent of 5.1 billion tonnes of greenhouse gas emissions. Government, and oil & gas industries need to push for stronger regulations to reduce emissions and protect the environment.
Conclusion:
The circular economy and sustainable supply chain in the oil & gas sector are reshaping the industry. Companies can become more sustainable by reducing waste, reusing resources, and following ethical business practices. This will help them stay profitable in the long run. As the world creates new regulatory frameworks, adherence to circular economy and sustainable supply chain in the oil & gas industry will become important for business strength and protecting the environment.
Have any questions or want to know more about circular economy and sustainable supply Chain in oil & gas sector? Please reach out to the COBE Ethics Chair at COBEEthics@boisestate.edu. Explore the College of Business and Economics (COBE) website to learn more about undergraduate and graduate degree programs in economics, and supply chain management.