Carbon Accounting for Oil and Gas Companies in India

Carbon Accounting for Oil and Gas Companies in India

India's oil and gas sector stands at a critical juncture. With India consuming approximately 5 million barrels of oil per day, the country ranks as the world's third-largest oil consumer. Major players including ONGC, BPCL, HPCL, Indian Oil, and Reliance Industries now face mandatory carbon accounting requirements as constituents of the SEBI top 1000 listed companies - part of India's broader push to embed carbon accounting across Indian industry. This regulatory shift demands sophisticated emissions measurement and reporting across the entire value chain - from upstream exploration through customer fuel consumption. Understanding carbon accounting in this sector is no longer optional; it's essential for compliance, investor confidence, and strategic planning.

Indian Oil and Gas Emissions Context

The Regulatory Landscape

India's top oil and gas companies are now required to report under the Business Responsibility and Sustainability Reporting (BRSR) framework. This mandatory disclosure regime applies to all companies in the BSE and NSE top 1000 by market capitalization, which includes every major Indian oil and gas operator. The sector's emissions profile is unique - oil and gas extraction, refining, and distribution create substantial greenhouse gas footprints across multiple scopes.

Scale of Industry Emissions

The upstream segment alone - exploration, development, and production activities - generates significant emissions through flaring, venting, and fugitive methane releases. Refineries represent another major emissions source, consuming vast quantities of fossil fuels for process heat and power generation. Downstream activities, including customer fuel consumption, dwarf direct operational emissions, making Scope 3 accounting critical for comprehensive carbon management in this sector.

Key Emission Sources in Oil and Gas Operations

Upstream Exploration and Production

Upstream operations are characterized by high-global warming potential methane emissions. Flaring - the controlled burning of excess natural gas - and venting - the direct release of gases to the atmosphere - represent the most material emissions sources. Methane leakage from equipment, pipelines, and storage facilities adds additional complexity to upstream carbon accounting.

The GHG Protocol and IPCC methodologies provide emission factors for these activities, but site-specific data collection is essential for accuracy. Companies must track flaring volumes, venting incidents, and equipment specifications to calculate precise emissions. Methane intensity metrics - typically expressed as kg CO2e per barrel of oil equivalent - enable performance benchmarking across producers.

Refinery Process Emissions (Scope 1)

Refineries consume massive quantities of fuel for process heat, hydrogen production, and power generation. These combustion emissions are classified as Scope 1 and represent the direct carbon footprint of refining crude oil into saleable products. Refineries also generate process emissions from catalytic cracking and other conversion processes.

Scope 2 emissions from purchased electricity form a secondary but still material component of refinery carbon accounting. The carbon intensity of grid electricity varies by region and generation mix, requiring detailed tracking of electricity purchases and corresponding emission factors. For a deeper look at how India's power sector emissions interact with industrial Scope 2 reporting, see our guide to carbon accounting for power and energy companies in India.

Product Use Emissions (Scope 3 Category 11)

For oil and gas companies, Scope 3 Category 11 - downstream combustion of sold products - typically represents 70-90% of total value chain emissions. When customers burn petrol, diesel, jet fuel, or LPG purchased from Indian oil companies, those combustion emissions are attributed to the producer under GHG Protocol Scope 3 methodology.

Calculating this category requires understanding product volumes sold, their carbon content, and applying standard combustion emission factors. A single barrel of crude oil refined into petrol generates approximately 0.31 tonnes of CO2e when burned. With millions of barrels processed annually, Scope 3 Category 11 easily exceeds 100 million tonnes CO2e for India's largest refiner.

BRSR Requirements for Oil and Gas Companies

What is BRSR Reporting? mandates specific disclosures for oil and gas operators. The framework requires companies to report:

• Flaring volumes and associated emissions - measured in cubic meters and tonnes CO2e
• Methane intensity metrics - typically kg CO2e per barrel of oil equivalent produced
• Oil spill data - volume spilled, response actions, and remediation costs
• Water withdrawal and consumption - critical for production and refining operations
• Scope 1, 2, and 3 emissions - with detailed breakdowns by source and category
• Energy consumption - fossil fuels and renewable energy, measured in kilocalories or megajoules
• Climate risk and opportunity assessment - aligned with TCFD recommendations

These disclosures must be verified by third-party auditors and submitted through BRSR reporting templates. The full requirements are set out in the BRSR circular issued by SEBI, which explicitly addresses the oil and gas sector's material environmental impacts.

Carbon Credits and Energy Efficiency Under CCTS

Designated Consumer Status

Indian refineries are recognized as Designated Consumers under the Perform, Achieve and Trade (PAT) scheme, India's primary carbon market mechanism. Refineries must meet specific energy consumption targets, and efficiency improvements generate tradeable carbon credits. How CCTS Works in India explains this mechanism in detail, but the mechanics are straightforward: refineries that consume less energy than their allocated budgets earn credits worth approximately USD 10-15 per tonne.

Building Compliance and Generating Credits

Leading companies like Reliance and Indian Oil have invested heavily in energy efficiency projects - optimizing furnace operations, implementing advanced process controls, and upgrading to high-efficiency equipment. These investments reduce fuel consumption, lower Scope 1 emissions, and generate marketable carbon credits. The financial returns from credits can offset initial capital expenditure.

Refineries must submit annual energy consumption data to the Bureau of Energy Efficiency (BEE), which verifies compliance and credit generation. Accurate carbon accounting is essential for demonstrating efficiency improvements and claiming credits legitimately.

Transition Risk and Climate Scenario Analysis

Stranded Asset Exposure

Oil and gas companies face structural transition risks as energy markets shift toward renewable electricity and sustainable fuels. Fossil fuel assets may become economically obsolete, creating "stranded asset" risk. Companies holding decades of oil and gas reserves in a carbon-constrained future face uncertainty about asset recoverability.

BRSR's Leadership Indicators require top-performing companies to assess transition risks and disclose climate scenarios aligned with TCFD recommendations. This forward-looking analysis helps investors understand management's strategy for navigating energy transition risks.

Climate Scenario Disclosures

Leading Indian oil companies are beginning to align with TCFD frameworks, modeling cash flows under various climate scenarios - 1.5°C, 2°C, and business-as-usual pathways. This analysis reveals which assets remain economically viable under different climate futures and informs capital allocation decisions. Companies demonstrating robust transition planning attract capital and talent more effectively than those ignoring climate risks.

FAQ

What BRSR disclosures are required for Indian oil and gas companies?

BRSR requires comprehensive reporting on Scope 1, 2, and 3 emissions, energy consumption, flaring volumes, methane intensity, oil spills, water usage, and transition risk assessment. All major oil companies must disclose these metrics annually through standardized BRSR templates verified by third-party auditors.

How do refineries calculate Scope 3 Category 11 product use emissions?

Refineries multiply total refined product volumes by product-specific carbon content factors. For petrol and diesel, standard emission factors of approximately 0.31 and 0.29 tonnes CO2e per liter burned apply across the industry. Jet fuel, heating oil, and LPG use different factors based on their carbon density and combustion characteristics.

Is ONGC required to file BRSR?

Yes. ONGC ranks among India's largest companies by market capitalization and is therefore mandated to file BRSR. As a fully government-owned enterprise, ONGC must disclose all standard metrics including Scope 1 emissions from upstream operations, Scope 2 from power consumption, and Scope 3 from oil product combustion by customers.

How does methane leakage factor into oil and gas carbon accounting?

Methane leakage occurs throughout upstream operations - from wellheads, pipelines, compressor stations, and storage facilities. Because methane has a global warming potential approximately 28-34 times higher than CO2 over a 100-year period, small methane volumes generate substantial CO2-equivalent emissions. Companies must track methane concentration, volumes released, and calculate CO2e using appropriate GWP factors specified in GHG Protocol guidelines.

When are 2026 BRSR filings due for oil and gas companies?

BRSR filings for financial year 2025-26 must be completed by August 31, 2026. Companies should implement robust carbon accounting systems immediately to ensure accurate, auditable data is available for year-end reporting. Engaging platforms like Greenio early in the financial year simplifies data collection and verification workflows.

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Carbon accounting in India's oil and gas sector has evolved from a sustainability aspiration to a regulatory mandate with financial and reputational consequences. Companies that invest in accurate emissions measurement, transparent reporting, and genuine efficiency improvements position themselves as industry leaders. The frameworks exist - BRSR, CCTS, TCFD alignment - and the measurement science is mature. Success now depends on implementation rigor, data quality, and management commitment to the energy transition.