Future of oil & gas industry hinges on cutting down emissions

January 2, 2023, by Melisa Cavcic

Multiple factors are currently at play on the global oil and gas scene, reshaping the future of the fossil fuels industry, which appears to depend on its ability to manage its greenhouse gas (GHG) footprint. This raises the question of the best way to tackle these emissions.

The climate crisis is a global prevailing concern and reducing emissions across the supply chain within the energy industry, from production to consumption, is seen as a way to tackle aspects of climate change. However, this requires collaboration between the energy industry and governments. Since international operators will need to demonstrate and disclose further emissions reductions in 2023, Wood Mackenzie predicts that the spending on decarbonisation will increase with a focus on methane emissions reduction and carbon capture and storage (CCS).

As the green shift makes strides on the global energy industry stage with hydrogen at the helm, multiple oil and gas players have set targets to minimise their Scope 1 and 2 emissions from production, processing and logistics.

International declaration calls for reduction of greenhouse gas emissions from fossil fuels

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Actions taken to achieve these emission targets cover steps to eliminate methane leaks, flaring and venting; scaling up of carbon capture usage and storage (CCUS) and CCS; electrification of offshore installations with power from shore and onshore/offshore wind and solar; and collaborations across the supply chain. Some companies are even working on curbing Scope 3 emissions from fuels that are burnt by users and consumers.

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Recent global energy trends indicate that the drive towards low-carbon and low-cost is the oil and gas industry paradigm, thus, companies and governments, which are able to achieve it, are expected to enjoy the benefits and advantages in the long term.

Is there a silver bullet for the global energy crisis?

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Bearing in mind the importance of curbing emissions in the oil and gas industry, Offshore Energy set up a poll on social media at the end of December 2022, asking: Which method will the oil and gas industry scale up in the coming years to curb its carbon footprint and meet its decarbonisation targets? The participants were offered four different choices: electrification, CCUS and CCS, eliminating methane emissions, or all of the above.

During the time this poll was open, 16 per cent of the participants voted for electrification as the best way to reduce emissions; 20 per cent cast their votes in favour of ramping up CCUS and CCS; only 11 per cent voted for eliminating methane emissions; and the overwhelming majority or 52 per cent voted for using all these methods to manage emissions.

Therefore, the final results of this poll confirm the widely understood notion that no stone should be left unturned as all these methods plus some other ones will be required to bring down the oil and gas industry’s emissions.

Slashing methane emissions to speed up decarbonisation

Despite the results of our poll in regards to the performance of reducing overall emissions from the oil and gas industry by eliminating methane, many argue that this is a very important piece in the emission reduction puzzle. One of the ardent proponents of this approach, Environmental Defense Fund Europe (EDFE), a non-governmental organisation looking for ways to clean the air, decarbonise shipping and reduce methane pollution, claims that cutting methane emissions is “the fastest way to slow global warming.”

According to this organisation, methane, the main component of fossil gas, is “a powerful greenhouse gas with 80 times the warming potential of CO₂ for the first 20 years it’s in the atmosphere. Human-caused methane emissions could warm the planet more over the next decade than CO₂ from burning fossil fuels. And its concentrations are rising fast.”

While methane emissions come from agriculture, energy and waste industries, Environmental Defense Fund Europe underscores that reducing it in the oil and gas sector is “the quickest, cheapest and most effective way to slow global warming — and put an otherwise wasted energy source to good use.” The organisation further explained that 70 per cent of emissions in the sector could be reduced with existing solutions, most of them at low or zero net cost.

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Back in December 2021, the European Commission presented the proposal for a regulation on methane emissions reduction in the energy sector, as a second part of the Fit for 55 legislative proposals that aim to implement the European Green Deal with a view to achieving climate neutrality in the European Union by 2050.

This followed the strategic vision set out in the EU Methane Strategy in 2020. At the COP26 UN Climate Conference in 2021, the EU launched the Global Methane Pledge in partnership with the United States, whereby over 100 countries committed to reducing their methane emissions by 30 per cent by 2030 compared to 2020 levels.

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With energy prices reaching record highs, the proposed EU Methane Regulation could put an end to wasting “a valuable fossil fuel energy source,” underlined EDFE. To this end, four solutions have been proposed to tackle the methane problem, allowing the EU to take a leadership role in driving down global methane emissions and turning science into action.

The organisation believes that global warming can be slowed, boosting energy security, by tackling the main challenges through science-based solutions. These four solutions aim to tackle the challenges posed by the lack of credible data from the energy industry, leaks across oil and gas infrastructure, venting and flaring, and address gas imports, which have a higher methane footprint than domestic gas.

Flavia Sollazzo, Senior Director EU Energy Transition, Environmental Defense Fund Europe, remarked: “The world is finally waking up to the dangers and potentials of methane, and the EU is in the best position to set an example.”

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As the EU’s Methane Regulation is passing through its institutions, methane reduction has a critical part to play not just in the climate crisis, but also in energy security, which is currently very high on the EU’s agenda.

A spokesperson for the Environmental Defense Fund Europe informed Offshore Energy in mid-December 2022 that EDFE set the wheels into motion to encourage EU Energy Ministers to take an ambitious approach to methane regulation. Based on EDFE’s findings, existing tech can cut emissions in half by 2030 and hit the brakes on dangerous warming. On the other hand, fully deploying the proposed solutions could avoid 5 degrees Celsius of warming by the end of the century.

In addition, methane emissions from the energy sector are about 70 per cent higher than official data shows and efforts to reduce methane emissions in the oil and gas sector have often been held back by a lack of reliable data, says EDFE. The spokesperson outlined that satellites such as MethaneSAT, a subsidiary of the EDF – being launched in early 2023 – would detect and quantify methane emissions with precision and at a scale not possible before.

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Ahead of the EU’s Council meeting on 19 December 2022, EDFE’s spokesperson further highlighted that it was “critically important for the EU’s regulation to have some real teeth.” Ahead of “a crucial decision” by the Council of the European Union, 11 leading NGOs raised concerns about the watering down of the EU Methane Regulation and called on the European Commission to speak up against the suggestions of the Council. The letter, which these organisations signed, makes detailed policy recommendations.

Following the meeting on 19 December, EU Member States agreed on a proposal to track and slash methane emissions in the energy sector. The text is “the first of its kind and a crucial contribution to climate action,” as methane is the second most important greenhouse gas following carbon dioxide, outlines the European Council.

Commenting on this, Jozef Síkela, Czech minister of industry and trade, said: “Methane is a powerful greenhouse gas, responsible for about 30 per cent of current global warming. This regulation will help us understand where methane emissions come from and address them effectively. This will help us meet our commitments under the Global Methane Pledge to cut methane emissions by 30 per cent by 2030.”

According to the European Council’s official statement following the meeting, the proposal introduces new requirements for the oil, gas and coal sectors to measure, report and verify methane emissions (MRV) at the highest standard. In line with this, operators will need to “carefully document all wells and mines, trace their emissions and take appropriate mitigation measures to prevent and minimise methane emissions in their operations,” as explained within the statement.

The general approach takes into account different types of infrastructure like offshore platforms, underground pipelines, or distribution networks and allows utilising various devices used to measure emissions while introducing flexibilities in specific national or geological circumstances.

Oil & gas operators to handle methane leaks

Moreover, the methane proposal points out that operators will have to measure and draw reports on methane emissions that will be checked by independent, accredited verifiers. Aside from having to detect and repair methane leaks, operators will need to carry out surveys of methane leaks in different types of infrastructures at set intervals, using devices with proposed minimum leak detection limits.

Afterwards, operators will need to repair or replace all leaking components above certain levels immediately after detection, and no later than five days for a first attempt and 30 days for a complete repair. Repairs of larger leaks are to be prioritised.

Based on this methane reduction proposal, offshore oil and gas wells deeper than 700 meters will be exempt, as emissions from those depths have a limited potential of reaching the atmosphere and there is an insufficient methodology for properly measuring emissions from such wells.

The statement further emphasises that venting and flaring practices, which release methane into the atmosphere, will be banned except for narrowly defined exceptional circumstances, like construction, repair, decommissioning, safety or testing of the components.

This ban will apply immediately at the entry into force of the regulation and in case its implementation is not possible due to further requirements such as permitting process or where the unavailability of equipment causes an exceptional delay, the implementation of the ban may be postponed by two years at most, the European Council’s statement underscores.

As inactive wells also emit methane, EU Member states are tasked with establishing and publishing an inventory of all recorded inactive wells, temporarily plugged wells and permanently plugged and abandoned wells. A more gradual approach for member states with a very high number of wells – 40 000 or more – is foreseen.

“Member states will develop mitigation plans to remediate, reclaim and permanently plug inactive wells and temporarily plugged wells. Offshore wells located at water depth between 200 and 700 meters may be exempted in specific circumstances,” concluded the statement.

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In the coal sector, the EU member states will have to continuously measure and report methane emissions from operating underground mines and from surface mines, drawing a public inventory of closed and abandoned mines since 50 years ago and measuring their emissions.

In light of this, flaring is expected to be banned from 1 January 2025 and venting in coal mines emitting more than 5 tonnes of methane per kilotonne of coal mined, from 1 January 2027, while in mines emitting more than 3 tonnes of methane per kilotonne of coal mined, it will be banned from 1 January 2031. Additionally, venting and flaring from closed and abandoned mines will be banned from 1 January 2030.

Monitoring methane emissions of oil, gas & coal imports

The EU has also decided that methane emissions from its energy imports will also be traced, as the new rules will put forward global monitoring tools that will increase the transparency of methane emissions from imports of oil, gas and coal into the EU.

This is anticipated to allow the European Commission to consider further actions in the future while the creation of two tools will show the performance and reduction efforts of countries and energy companies across the globe in curbing their methane emissions, as concluded in the statement on the proposed methane regulation. The European Council will now enter negotiations with the Parliament to reach an agreement on a final text.

EU accused of backing watered down proposal on methane

After the EU Energy Ministers adopted their position and worked out a general approach to the proposed regulation to tackle wasted methane emissions from the oil and gas sector, the EU’s proposal was described as falling short of the promise to cut methane emissions.

Responding to the proposal on reining in methane emissions, Sollazzo, said: “This is a very disappointing outcome. As an architect of the Global Methane Pledge, the EU now risks falling short of its own commitments to curb this extremely dirty greenhouse gas. Energy Ministers have scaled back their ambitions, especially when it comes to leak detection and repair.

“Methane waste makes no sense from a climate, energy security or economic point of view. Today’s decision by ministers to water down legislation is a self-inflicted wound. The legislative process is not over yet, and we will continue to urge the EU to adopt an ambitious law that sets a standard for the rest of the world.”

Based on a new analysis by S&P Global, commissioned by the Environmental Defense Fund, cutting these preventable losses in six key export regions, it is estimated that more than 80 billion cubic meters (bcm) of methane could be captured and profitably brought to market. That is almost 60 per cent of Europe’s pre-war annual imports from Russia.

This analysis lays out specific steps that could bring 40 bcm of new supply to market – more than the total annual gas demand of France – in just two to three years, using export capacity either in place or under construction today. Capturing this gas would avert 760 metric tonnes of CO₂ equivalent, an amount roughly the size of Germany’s total annual emissions, highlights EDFE.

Jill Duggan, Executive Director at Environmental Defense Fund Europe, added: “Tackling methane waste from the oil and gas industry is a triple win for the climate, consumers and business. It prevents methane from escaping into the atmosphere; the wasted methane can be channeled back into warming our homes; and industry can benefit from the revenue of gas that is not lost.”