Greenhouse Gas Emissions

Scope Of Emissions Evaluation

Provide aggregated greenhouse gas (GHG) emissions data for all relevant categories across Scopes 1, 2, and 3. Emissions data is calculated per specifications of the Greenhouse Gas Protocol (GHGp) standard and aligned with the International Organizational Standard ISO 14064-1.

Scope 1 – Direct Emissions (Total Control)

• Stationary fuel consumption 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 includes GHG emissions from the operation of our aerobic wastewater treatment facilities.
• Fugitive emissions includes 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 Categories

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

Scope 3 – Indirect Emissions (Limited Control)

• 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.
• 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 used to keep offshore rig operations running during product installation and removal.

 

Boundaries And Recalculations

Proforma Calculations

Calculation methodologies are consistent across the base year (2015) and the subsequent reporting years (to 2021) using the emissions factors relevant to the period recorded. Dril-Quip operates with a recalculation policy ─ a ‘significant threshold’ for structural change defined as outsourcing, divestment, acquisition or mergers that impact group emissions by >5%.

Because of this, the base year (2015) has been re-calculated to provide proforma GHG emissions, excluding the now outsourced ‘Forging Business’ to provide consistent tracking and meaningful comparison.*

*The ‘Forging Business’ was outsourced in the year 2019 and, as such, is no longer part of Dril-Quip Group's direct operations. The ‘Forging Business’ consumed 465,081 mmBTU of natural gas and acquired 9,331 thousand kWh (MWh) of electricity in 2015. The associated emissions of these activities totaled 29,556 metric tonnes of CO2e emissions in 2015. The use of forging equipment in Dril-Quip Group’s value chain is now included in the Scope 3 calculations (Category 1). The total location-based Scope 1 + 2 GHG emissions for Dril-Quip in the base year 2015, including the forging business, totaled 52,520 metric tonnes compared to 22,964 metric tonnes proforma (excluding the forging business).

Organizational Boundaries

Dril-Quip uses the ‘equity’ accounting method as defined by the GHGp. 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. Most 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 20 satellite locations for sales offices, service centers and storage. Per the GHGp standard, associated emissions from stationary fuel combustion and electricity are included in Scope 3 (upstream leased assets). These leased emissions account for less than 5% of combined Scope 1 and Scope 2 emissions.

Scopes 1, 2, and 3 GHG Emissions Overview*

Emissions by Scope

Metric Tonnes CO2e per Year	2015	2020	2021
Scope 1	3,686	3,032	3,724
Scope 2 (Market-Based)	16,923	7,440	8,161
Scope 2 (Location-Based)	19,278	9,149	9,031
Scope 1 and 2 (Market-Based)	20,609	10,472	11,885
Scope 1 and 2 (Location-Based)	22,964	12,181	12,755
Scope 3		190,118	220,552
Scope 1, 2, and 3 (Market-Based)	20,609	200,590	232,437
Scope 1, 2, and 3 (Location-Based)	22,964	202,299	233,307

Emissions by GHG

Metric Tonnes CO2e per Year	2015	2020	2021
Scope 1 and 2 (Market-Based)
Carbon Dioxide (CO2)	20,270	10,041	10,497
Methane (CH4)	269	18	189
Nitrous Oxide (N2O)	70	35	35
Hydrofluorocarbons (HFC)	0	378	1,164
Perfluorocarbons (PFC)	0	0	0
Sulphur Hexafluoride (SF6)	0	0	0
Nitrogen Trifluoride(NF3)	0	0	0
Scope 1 and 2 (Market-Based)	20,609	10,472	11,885

Emissions of Each GHG by Mass

Metric Tonnes Gas per Year	2015	2020	2021
Scope 1 and 2 (Market-Based)
Carbon Dioxide (CO2)	20,270	10,041	10,497
Methane (CH4)	10	1	7
Nitrous Oxide (N2O)	0.3	0.1	0.1
Hydrofluorocarbons (HFC)	0.0	0.2	0.5
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)	20,280	10,042	10,504

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

Group GHG Emissions: Trend Overview

In 2021, our combined Scopes 1, 2, and 3 emissions totaled 232,437 metric tonnes. of CO2e1. This was comprised of Scope 1 emissions of 3,724 metric tonnes (2%), Scope 2 emissions of 8,161 metric tonnes (4%), and Scope 3 emissions of 220,552 metric tonnes (95%). Total group emissions increased by 15% in 2021 (compared to 2020) due primarily to increases in Scope 3 activity across the categories ‘Products and Services’ and ‘Use of Sold Products.’ This was a function of an increased sales pipeline and improved business activity during the year.

• Scope 1 GHG emissions in 2021 were comprised of 1,692 metric tonnes (45%) from stationary combustion, 847 metric tonnes (23%) from fuel use in vehicles, 20 metric tonnes from wastewater treatment (1%), and 1,165 metric tonnes (31%) from refrigerant release.

Scope 1 emissions increased by 23% in 2021 due to an increase in refrigerant release, only partially offset by lower emissions from stationary combustion.

• Scope 2 The acquisition of electricity accounted for 8,161 metric tonnes of CO2e emissions on market-based calculations and 9,031 metric tonnes of CO2e on location-based calculations2. Market-based emissions are lower than location-based emissions due to the purchasing of 100% renewable electricity at our Aberdeen manufacturing location.

Scope 2 Location-based emissions increased by 1% in 2021 due to slightly higher electricity consumption. Market-based Scope 2 emissions increased by 10% in 2021 due to lower consumption in Aberdeen, offset by higher consumption in Houston, resulting in a higher average emissions factor.

• Scope 3 GHG emissions in 2021 were a function of Products and Services: 116,442 metric tonnes (53%), Capital Goods: 7,383 metric tonnes (3%), Fuel and Energy: 2,546 metric tonnes (1%), Upstream Transport and Distribution: 3,400 metric tonnes (2%), Waste: 2,115 metric tonnes (1%), Business Travel: 594 metric tonnes (0.3%), Employee Commuting: 1,496 metric tonnes (1%), Upstream Leased Assets: 287 metric tonnes (0.1%), Downstream Transport and Distribution: 86 metric tonnes (0.04%), Use of Sold Products: 16,010 metric tonnes (7%), End-of-Life Treatment: 26,461 metric tonnes (12%), and Downstream Leased Assets: 43,731 metric tonnes (20%).

Scope 3 emissions increased by 16% in 2021 due to a 29% increase in Goods and Services emissions and a 30% increase in Use of Sold Products emissions.

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.

² The ‘location-based’ method uses an average emissions factor related to the grid on which the energy consumption occurs. The ‘market-based’ method uses an emissions factor specific to the electricity purchased (as specified by the Greenhouse Gas Protocol).

Data Omissions And Estimates

Activity data from 6 of the 20 leased satellite locations have been recorded for 2021 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.

With more than 80% of Scope 3 emissions coming from products and services, capital goods, and downstream leased assets, we are working closely with suppliers and customers to find avenues to decarbonize their operations further and help them set their targets aligned with the 1.5°C global warming scenario to reduce emissions across the entire value chain.

Decarbonization Execution

Decarbonization Pathway	Initiative	Emissions Category
Scope 1 and 2 Emissions
Switch to Renewables	Switch to renewables across major facility locations, starting with our Houston headquarters, which drives the majority of Scope 2 emissions	Scope 2 – Purchased Electricity
Manufacturing Footprint Optimization	Reduce our footprint at major property locations	Scope 1 - Facilities
Facility/Equipment Improvement	Invest in infrastructure to reduce leaks in air conditioning units and minimize refrigerant leakage	Scope 1 - Facilities
Reduction in Fleet and Electrification of Transport	Reduce our fleet vehicle inventory and explore business opportunities for electric on-road and off-road transport	Scope 1 – Vehicles
Scope 3 Emissions
Engage with Key Suppliers	Reduce upstream emissions in sourcing activity through greater engagement with key suppliers to help them reduce their carbon footprint and commit to long-term targets of GHG emissions	Scope 3 Category 1 –Purchased Goods and Services Scope 3 Category 2 – Capital Goods
Engage with Customers	Partner with our customers to develop engineered solutions to reduce emissions during product fitting and installation by aligning our solutions with their long-term decarbonization goals	Scope 3 Category 11 – Use of Sold Products Scope 3 Category 13 – Downstream Leased Assets

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.