Executive Summary: The Shift Toward Product-Level Carbon Accounting
Governments worldwide are introducing policies aimed at reducing greenhouse gas emissions, increasing pressure on energy companies to move beyond broad corporate emissions targets. While many companies have established Scope 1 and Scope 2 reduction commitments and in some cases Scope 3 emerging regulations increasingly focus on the carbon footprint of individual products across their full value chains.
For GCC energy producers, this transition presents both opportunity and challenge. GCC energy products generally exhibit lower carbon intensity than global averages. As global policies tighten, product-level transparency creates commercial advantages, supports long-term market access, and strengthens investment attractiveness.
From Enterprise-Level to Product-Level Decarbonization
Major global energy companies have announced ambitious emissions targets extending to 2040 and 2050, often covering operational emissions (Scopes 1 and 2) and, in some cases, product use (Scope 3). However, regulatory momentum is shifting toward product-level measurement and reporting.
New frameworks require transparency regarding emissions embedded throughout a product’s lifecycle from extraction and processing to logistics and end-of-life treatment. Policies such as the European Union’s Carbon Border Adjustment Mechanism (CBAM), the U.S. Foreign Pollution Fee Act (FPFA), the International Maritime Organization’s greenhouse gas strategy, and the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) demonstrate this global trend.
CBAM, launched in 2023, requires reporting of embedded carbon intensity for carbon-intensive imports and will eventually impose penalties on products exceeding defined thresholds. CORSIA compels airlines to mitigate emissions above 2019 levels, indirectly pressuring fuel suppliers to reduce product carbon intensity.
The 3D Framework: Aligning Policy, Sectors, and Products
The report introduces a 3D framework that maps global carbon policies across sectors and specific products. This real-time analytical structure allows companies to assess how regulations intersect with crude oil, LNG, jet fuel, petrochemicals, bunker fuel, and hydrogen across sectors such as aviation, marine, power, steel, plastics, and road transport.
This framework adds a new pricing dimension to energy commodities by integrating carbon intensity considerations into competitiveness. Companies adopting such structured monitoring gain agility in responding to evolving policy environments.
Carbon Accounting as a Source of Competitive Advantage
The oil and gas industry underpins numerous industrial supply chains, including power generation, transport, steel, cement, petrochemicals, and plastics. Decarbonizing upstream production therefore reduces embedded emissions across downstream sectors.
Data presented in the report indicate that selected GCC crude streams exhibit significantly lower carbon intensity compared with the global average. For example, regional crude intensities range between approximately 13.9 and 28.4 kg CO₂e per barrel at refinery entrance, compared with a global average of 50.5 kg CO₂e per barrel.
Shifting to product-level accounting offers several strategic advantages: enhanced market responsiveness, improved compliance with destination-market policies, product differentiation through transparency, and long-term resilience amid regulatory shifts.
The Challenges of Product-Level Carbon Accounting
Despite strategic benefits, implementing product-level carbon accounting presents operational complexity. Many GCC energy companies are still refining enterprise-level accounting systems. Moving to product-level granularity requires sophisticated methodologies, automated systems, and extensive data management.
Allocating emissions across shared facilities, particularly in integrated oil and gas operations, is technically demanding. Scope 3 emissions introduce further complexity because they depend on collaboration across extended value chains.
The gasoline value chain illustrates these difficulties, involving multiple processing streams such as fluid catalytic cracking, hydrocracking, reforming, and blending pools, each contributing distinct emissions profiles.
Comparing Carbon Profiles: Crude Oil and LNG
The report compares carbon emissions distribution across the crude oil and LNG value chains. For crude oil, emissions are split roughly evenly between upstream and midstream stages. Extraction and surface processing contribute meaningful shares, while transport and shipping add further emissions.
By contrast, LNG emissions are heavily concentrated upstream, particularly within liquefaction facilities, which account for a substantial share of total emissions. These structural differences imply that decarbonization strategies must be product-specific.
Decarbonization Pathways by Product
Each product’s decarbonization pathway varies in effectiveness depending on stage and emissions source. For crude oil, electrification of gas injection compressors and use of grid electricity instead of captive gas generation can significantly reduce emissions from extraction. Renewable energy integration supports these reductions.
In LNG operations, carbon capture and storage (CCS) is particularly effective at large, concentrated emission sources such as gas processing and liquefaction plants. However, distributed upstream crude emissions are more difficult to address through CCS.
Key decarbonization levers include energy efficiency, flaring reduction, leak detection and repair, renewable integration, CCS, and offsetting. The relative effectiveness of each lever differs by product and value chain stage.
How to Take Action
The report outlines four priority actions for GCC energy players:
First, develop and codify comprehensive product-level carbon accounting frameworks aligned with global standards.
Second, invest in automation systems and data infrastructure to enable accurate measurement, reporting, and verification.
Third, establish governance structures and decision rights that prioritize decarbonization investments based on product exposure to key markets.
Fourth, continuously monitor evolving international and national carbon regulations and adapt corporate strategies accordingly.
Conclusion
As carbon policy increasingly targets product-level emissions, enterprise-level decarbonization strategies alone are insufficient. A structured, product-focused approach enhances adaptability, regulatory compliance, and competitive positioning in carbon-conscious markets.
For GCC energy exporters, lower baseline carbon intensity combined with advanced product-level accounting can translate into long-term market access, strengthened competitiveness, and resilience in an evolving global energy landscape.
