Summary
Details
- Global
The OGDC is voluntary at the international level.
However, it creates mandatory expectations through:
Alignment with national regulations.
Investor and lender requirements.
Integration into procurement and partnership agreements
Exceptions may occur in:
Legacy assets with technical constraints.
Regions lacking infrastructure for gas utilization.
Such exceptions must be justified and documented.
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What’s Required
The Oil and Gas Decarbonization Charter represents a sector-specific decarbonization governance framework designed to standardise operational climate performance across upstream oil and gas activities. While formally voluntary, it establishes a quasi-regulatory baseline that aligns with emerging methane regulations, carbon pricing systems and investor-driven disclosure expectations.
The charter imposes a set of operational, technical and reporting obligations on participating companies, particularly national oil companies and international energy majors.
1. Methane Emissions Measurement and Abatement
A central requirement of the OGDC is the systematic reduction of methane emissions, which are a major contributor to short-term climate forcing.
Companies must:
Achieve near-zero methane emissions by 2030.
Implement comprehensive leak detection and repair (LDAR) programmes across upstream assets.
Transition from engineering estimates to measurement-based emissions quantification, including deployment of advanced monitoring technologies such as continuous sensors, aerial surveillance and satellite detection.
Operationally, this requires:
Identification and elimination of super-emitter sources.
Replacement of high-bleed pneumatic devices.
Installation of vapour recovery units and closed-loop systems.
Companies must also establish asset-level methane inventories, ensuring traceability and auditability of emissions data.
2. Elimination of Routine Flaring
The charter mandates the elimination of routine flaring by 2030, aligning with World Bank Zero Routine Flaring objectives.
Companies must:
Redesign field development plans to avoid flaring.
Invest in gas capture, reinjection or utilization infrastructure.
Implement real-time monitoring of flaring volumes.
Flaring must be limited to safety-related or emergency conditions, with full documentation and reporting.
3. Scope 1 and Scope 2 Emissions Reduction
Participating companies must significantly reduce operational emissions associated with energy use in extraction, processing and transport.
This includes:
Electrification of upstream operations using low-carbon electricity.
Integration of renewable energy into oil and gas production sites.
Deployment of energy efficiency measures across facilities.
Companies are expected to align emissions intensity with net-zero pathways, often expressed in terms of emissions per unit of production.
4. Carbon Intensity and Portfolio Alignment
The charter introduces expectations for carbon intensity reduction across portfolios, requiring companies to:
Measure emissions intensity at the asset and portfolio level.
Benchmark performance against industry pathways.
Integrate emissions considerations into capital allocation decisions.
This creates a linkage between operational emissions performance and long-term portfolio strategy.
5. Monitoring, Reporting and Verification (MRV)
The OGDC requires companies to establish robust MRV systems.
This includes:
Annual disclosure of methane emissions and intensity metrics
Reporting of flaring volumes and reduction progress
Disclosure of Scope 1 and Scope 2 emissions
Companies must ensure consistency with international reporting frameworks such as:
OGMP 2.0.
TCFD.
ISSB standards.
Data must be auditable and supported by documented methodologies.
6. Technology Deployment and Innovation
The charter emphasises the deployment of best available technologies for emissions reduction.
This includes:
Advanced methane detection technologies.
Carbon capture, utilisation and storage (CCUS).
Digital monitoring systems and predictive maintenance tools.
Companies are expected to integrate these technologies into operational strategies and capital investment plans.
7. Alignment with Regulatory and Financial Frameworks
The OGDC is designed to align with and anticipate regulatory developments, including:
EU methane regulation.
US methane rules.
Carbon pricing mechanisms.
It also interacts with financial frameworks, as compliance with OGDC commitments increasingly affects access to:
Sustainable finance.
ESG-linked investment.
Insurance and underwriting conditions.
Important Deadlines
Launch: December 2023 (COP28)
Key targets:
2030:
Near-zero methane emissions
Elimination of routine flaring
Significant reduction in Scope 1 and Scope 2 emissions
Intermediate milestones:
Defined by participating companies and aligned with national regulatory timelines
Current Status
The charter has been endorsed by a large number of oil and gas companies, including both international majors and national oil companies.
It is rapidly becoming a reference framework for operational decarbonization in the sector.
Its requirements are increasingly reflected in regulatory developments and investor expectations.
Penalties for Non-Compliance
There are no direct penalties under the charter.
However, non-compliance may lead to:
Loss of credibility in ESG and climate commitments.
Increased scrutiny from regulators and investors.
Restricted access to capital and insurance markets.
Where commitments overlap with regulatory requirements, companies may also face:
Financial penalties for methane emissions.
Enforcement actions for flaring violations.
Examples of Known Violations
Common implementation risks include:
Continued routine flaring due to infrastructure limitations.
Underreporting of methane emissions due to reliance on estimation methods.
Incomplete coverage of emissions across asset portfolios.
Misalignment between corporate commitments and actual capital expenditure.
These gaps are increasingly scrutinised by regulators and investors.
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