Greenhouse Gas Emissions

Scope Of Emissions Evaluation

Emissions data is calculated per the specifications of the Greenhouse Gas Protocol (GHGPR) standard and is aligned with the International Organizational Standard ISO 14064- 1.

Scope 1 – Direct Emissions (Total Control)

• Stationary fuel consumption is predominantly led by the use of natural gas for heating, with minor contributions from liquid propane heating and the diesel fuel used for onsite electricity generation.
• Mobile fuel consumption includes the use of gasoline, diesel, and LPG fuel that powers our light goods and heavy-duty vehicles.
• Process emissions include GHG emissions from the operation of our aerobic wastewater treatment facilities.
• Fugitive emissions include the release of refrigerants from air-conditioning systems and industrial equipment.

Scope 2 – Indirect Emissions (Significant Control)

Acquired electricity: the emissions associated with the generation and provision of electricity acquired and used in our industrial manufacturing facilities.

Scope 3 – Indirect Emissions (Limited Control)

Scope 3 emissions calculations and methodology are consistent with the GHGp Corporate Value Chain (Scope 3) Standard. The calculations cover the relevant GHG-emitting activity categories as noted below:

• Category 1 Products and Services: emissions from acquired goods used to manufacture Dril-Quip products. Goods include steel pipe, forged steel products, steel valves, elastomers, thermoplastics, and mixed intermediate materials.*

*(In 2022, Dril-Quip conducted a comprehensive re-classification system of the products received from suppliers to provide incremental clarity and improve emissions reporting. This new re-classification system will be maintained going forward and will be formally launched into the procurement process effective 2024.)

• Category 2 Capital Goods: embedded emissions from acquired capital goods, including equipment and vehicles.
• Category 3 Fuel and Energy-Related Activities: emissions released from the extraction, processing, and distribution of the natural gas, gasoline, diesel, propane, and electricity used in Scopes 1 and 2.
• Category 4 Upstream Transport and Distribution: emissions released from outsourced goods transportation services, including air, ocean, and road transport, paid for by Dril-Quip.
• Category 5 Waste Generated in Operations: emissions from outsourced waste treatment processes, including combustion, recycling, landfill, and aerobic and anaerobic water discharge.
• Category 6 Business Travel: emissions from employee business travel, including air, rail, leased cars, and taxis.
• Category 7 Employee Commuting: emissions from employee personal vehicles and public transport use while commuting to and from work.
• Category 8 Upstream Leased Assets: emissions related to stationary combustion and electricity purchases for leased locations, including satellite sales offices, storage warehouses, and service centers.
• Category 9 Downstream Transportation and Distribution: emissions from outsourced goods transportation services, including air, ocean, and road transport, paid for by the customer.
• Category 11 Use of Sold Products: includes emissions associated with the installation of Dril-Quip products by customers and the emissions from the combusted fuel used to keep offshore rig operations running during product installation.
• Category 12 End-of-Life Treatment of Sold Products: emissions from the disposal and recycling of Dril-Quip products.
• Category 13 Downstream Leased Assets: includes emissions associated with the installation and removal of Dril-Quip equipment rented by customers. The emissions from the combusted fuel are used to keep offshore rig operations running during product installation and removal.

Boundaries And Recalculations

Organizational Boundaries

Dril-Quip uses the ‘equity’ accounting method as defined by the GHG Protocol. Consolidated GHG emissions are allocated based on the equity ownership (economic interest) of all operations. Equity reporting was chosen to best align the GHG emissions inventory with our business's commercial reality and provide the most relevant information for decision-making needs. The majority of our global manufacturing, servicing, and sales operations are based across four locations — Houston, Brazil, Aberdeen, and Singapore, which are all under 100% equity control.

Operational Boundaries

Consolidated data is reported across three geographic segments, consistent with our financial revenue reporting: Western Hemisphere (Americas and Latin America), Eastern Hemisphere (Europe, Middle East, and Africa), and Asia Pacific.  We lease 22 satellite locations for sales offices, service centers, and storage. Per the GHG Protocol, associated emissions from stationary fuel combustion and electricity are included in Scope 3 (upstream leased assets).

Scopes 1, 2, and 3 GHG Emissions Overview*

Emissions by Scope

Metric Tonnes CO2e per Year	2020	2021	2022
Scope 1	3,034	3,731	4,080
Scope 2 - Market Based	7,331	8,166	4,534
Scope 2 - Location Based	9,149	9,031	8,187
Scope 1 + 2 (Market Based)	10,365	11,897	8,613
Scope 1 + 2 (Location Based)	12,182	12,762	12,267
Scope 3	257,824	366,184	301,675
Scope 1, 2, and 3 (Market Based)	268,189	378,081	310,289
Scope 1, 2, and 3 (Location Based)	270,006	378,945	313,942

Emissions by GHG

Metric Tonnes CO2e per Year	2020	2021	2022
Scope 1 + 2 (Market Based)
Carbon Dioxide (CO2)	9,931	10,516	7,064
Methane (CH4)	19	184	147
Nitrous Oxide (N2O)	38	31	34
Hydrofluorocarbons (HFC)	378	1,164	1,369
Perfluorocarbons (PFC)	0	0	0
Sulphur Hexafluoride (SF6)	0	0	0
Nitrogen Trifluoride(NF3)	0	0	0
Scope 1 + 2 (Market Based)	10,365	11,897	8,613

Emissions of Each GHG by Mass

Metric Tonnes Gas per Year	2020	2021	2022
Scope 1 + 2 (Market Based)
Carbon Dioxide (CO2)	9,931	10,516	7,064
Methane (CH4)	1	7	5
Nitrous Oxide (N2O)	0.1	0.1	0.1
Hydrofluorocarbons (HFC)	0.2	0.5	0.6
Perfluorocarbons (PFC)	0.0	0.0	0.0
Sulphur Hexafluoride (SF6)	0.0	0.0	0.0
Nitrogen Trifluoride(NF3)	0.0	0.0	0.0
Scope 1 and 2 (Market-Based)	9,932	10,524	7,070

*No biofuel or land-use emissions were released. As such, no data is presented for these categories.

Group GHG Emissions: Trend Overview

In 2022, our combined Scope 1, 2, and 3 emissions totaled 310,289 metric tonnes of CO2e¹. This was comprised of Scope 1 emissions of 4,080 metric tonnes (1.3% of total), Scope 2 emissions of 4,534 metric tonnes (1.5% of total), and Scope 3 emissions of 301,675 metric tonnes (97.2% of total emissions).

Our Scope 1, 2, and 3 emissions decreased by 18% in 2022, compared to our baseline year of 2021, largely due to a decrease in Scope 3 activity across the categories: “Upstream Products and Services” and “Upstream Transport and Distribution,” which represent nearly 70% of total Scope 3 emissions.

• Scope 1 GHG emissions were comprised of the following: 1,681 metric tonnes (41%) from stationary combustion, 1,002 metric tonnes (25%) from mobile consumption, 28 metric tonnes (1%) from wastewater treatment, and 1,369 (34%) from refrigerant release.
  • Scope 1 emissions increased by 9% in 2022, due to an increase in refrigerant release and fuel use in vehicles, only partially offset by lower emissions from stationary combustion.
• Scope 2 emissions (market-based) saw a 44% decline to 4,534 metric tonnes from 8,166 metric tonnes in 2021, largely due to Dril-Quip’s Houston facility switching to a renewables contract in August 2022.
• Scope 3 emissions decreased by 18% in 2022, primarily due to a 27% decrease in Upstream Products and Services and a 30% decline in Upstream and Transport Emissions, only partially offset by an uptick in Capital Goods, Upstream Waste, and Business Travel.

¹ The universal unit of measurement to indicate the global warming potential (GWP) of each of the six greenhouse gases, expressed in terms of the GWP of one unit of carbon dioxide. It is used to evaluate releasing (or avoiding releasing) different greenhouse gases against a common basis.

Data Omissions And Estimates

Activity data from 8 of the 22 leased satellite locations have been recorded for 2022 and used to estimate emissions for all satellite locations based on average emissions factors according to the building size (fuel/energy use per square foot). The combined emissions from these leased assets are estimated at less than 3% of our Scope 1 and Scope 2 GHG emissions, which is below the materiality boundary (5%). We are working to ensure data capture for all leased assets going forward.

On The Road To Excellence

We have formally launched our decarbonization targets to align with a 1.5°C global warming pathway and the ambitions of the Paris Accord, which seeks to limit global warming to well below 2°C pre-industrial levels.

Dril-Quip targets the absolute reduction of combined Scope 1 and Scope 2 emissions by more than 50% between 2021 and our target year 2030. Decarbonization actions include:

• Switching to renewable electricity across major manufacturing sites
• Rightsizing facilities
• Investing in infrastructure to reduce fugitive emissions
• Downscaling and evaluating the electrification of our vehicle fleet

Launch of these decarbonization initiatives will enable Dril-Quip to achieve a > 50% reduction in Scope 1 and 2 emissions to align with the 1.5°C scenario by 2030.

Decarbonization Execution

Task Force on Climate-Related Financial Disclosures (TCFD)

Because Dril-Quip complies with the TCFD, we report our climate-related risks and opportunities.

Read our full TCFD framework.