Methane Abatement in the Oil & Gas Industry: State of the Science and a Real Opportunity to Decarbonize

 

     This post is a review and summary of a great article put out by Wood MacKenzie - Mission invisible: Tackling the oil and gas industry's methane problem - that has some clear and detailed data about methane emissions by source, U.S. basins, regions, and countries. Knowing this data helps to clarify goals and opportunities.

     The scope of the problem is that methane from all sources, including naturally occurring sources, is responsible for nearly a third of global warming. Methane from oil & gas systems makes up about a quarter of that total. Thus, methane emissions from oil and gas are thought to be responsible for nearly 9% of global warming. If that can be reduced by 30% by 2030 as the Global Methane Pledge aspires to do, then that would bring the oil & gas contribution to global warming down closer to 6%. However, the problem with this is that not all countries are equally devoted to methane emissions mitigation so it may not be a realistic goal, even if some dedicated countries can reduce further than 30%. It is doable in theory, but it is not clear if it is doable in practice.

     One of the challenges of methane abatement is simply getting accurate measurements of leak sites and leak rates at each site. Satellite measurements can be very helpful but do not quantify leak rates at sufficient resolution. WoodMac classifies leaks as ‘super-emitters’ – those very large leaks that can be easily seen with satellites but are few in number, and ‘snowballers’ – much smaller leaks that are much greater in number and often go undetected. While super-emitters grab headlines and offer great advantages in abatement, the cumulative impact of the snowballers adds up to the biggest impact by far.

     The following graph is the best and most comprehensive one I have seen on methane emissions by source. However, many researchers think that anthropogenic methane leakage is underestimated from all sources.

 

 

     Smaller emissions come from deliberate venting and flaring as well as valves, pneumatic devices, venting from tanks and wellheads, and incomplete combustion in generators and flare stacks. The graph below shows emissions relative to Permian emissions (at 100%). WoodMac notes that leakage estimates vary widely, with most suggesting that they are underestimated and that they are challenging to identify and quantify.

 

 

     Better detection and data accuracy for smaller leaks are needed but are often difficult to obtain. The main methods of detection are: “satellites, aircraft, drones, regional sensors, point sensors and, most commonly, optical gas imaging (OGI) cameras.” Better spatial, spectral, and temporal resolution are needed for satellite leak detection and quantification. There are three classes of satellites in operation, or about to be in the case of one. The first type (class1) has been in operation for a while and can provide data on average GHG concentrations over large areas. The second (class 2) will begin ops in 2024 as Environmental Defense Fund’s MethaneSAT is deployed. It will measure concentration changes over time, providing better temporal resolution. It is expected to cover 80% of oil& gas sector emissions and will pick up both point-source emissions and dispersed area sources. It is expected to provide better emissions estimates than previous satellites. The third type (class 3) focuses on point-source emissions but does not include wider coverage. The data can be integrated. One goal is to establish average emissions per typical field, which is often below the resolution of satellites at less than 500 kg/hr (around 0.65 mmcfd). Geostationary satellites provide great temporal resolution, but orbital satellites provide better spatial resolution. The nature of the methane molecule as highly dispersive (it can travel far quickly) makes pinpointing the actual emissions source of leaks difficult. Weather and atmospheric data can help in this regard. Detection over surface waters is also difficult due to spectral similarities of water and other atmospheric components, particularly over rough seas. This makes satellite-based leak detection and analysis tough for offshore facilities. Increasing spectral resolution with more finely tuned spectrometers is the key to resolving this issue. WoodMac gives an interesting example of satellite data from different types over the large Aliso Canyon gas storage field leak in 2015 that shows the limitations of satellite data.

 

 

     The Global Methane Pledge, launched at COP26 in the fall of 2021, covers about 45% of global emissions but does not cover the world’s three biggest emitters: Russia, China, and India. Global partnerships include the Oil and Gas Climate Initiative (OGCI), a group of 12 large producers, and the Oil and Gas Methane Partnership 2.0 which includes 110 companies. The U.S. has fines set to go into effect in 2024 at $900 per mt with increases to $1200 per mt in 2025 and $1500 per mt in 2026. The E.U. is working on comparable rules. Canada hopes to decrease emissions by 75% from 2012 levels by 2030. The efforts by the E.U. and Canada are enforceable through their compliance with carbon markets. Columbia and Nigeria are the first countries in South America and Africa, respectively, to regulate methane emissions, although Nigeria has a long way to go due to both extensive flaring and venting and illegal and dangerous processing and refining operations. China is exploring regulations. India has delayed and is not ready. Russia, the world’s largest methane emitter, likely has no plans to regulate. WoodMac notes that the OGCI companies have already reduced emissions by 45% over the past five years so that tells us that with the right amount of investment and the will to do it, it is doable.

 

 

 

 

     While super-emitters can be cost-effective to fix, the smaller leaks are not and require the will to do so if voluntary or regulations. Incentives can help companies address these more expensive-to-fix leaks. Carbon markets and premium pricing for methane-abated natural gas are examples. More buyers, particularly in Europe, are demanding methane-abated gas. WoodMac notes another approach that has been developed for orphan and abandoned wells: methane leak reduction as a service: “Methane reduction as a service may also have a future. This is currently monetised in the relatively uncertain offset market amid growing interest. The American Carbon Registry recently published a methodology to generate offsets from plugging methane leaks resulting from orphan and abandoned oil and gas wells. While prices for these offsets remain low, as more stringent regulations come into play those offsets should become more valuable.”

     It appears that as certain countries lag behind in emissions reduction, they will have fewer places to sell their gas. Russia is key here as one of the world’s largest producers and exporters. They continue to enjoy selling to their fellow laggards, India, and China but others will drop them as time goes on. As the methane mitigation industry grows, as emissions become better quantified, and as leak detection equipment drops in price, those without access to mitigation will gain it, especially if goaded by regulations and lost sales.

     The following graph shows the easiest and hardest. The cheapest and costliest means to reduce GHGs in the oil & gas sector. Clearly, leak detection & repair, venting reduction, high-loss equipment replacement, tank vapor recovery, and flaring reduction are the low-hanging fruits and should and will be addressed first.

 

     Government support for emissions reductions can be in the form of regulations and enforcement such as fines and financial support for technology development. The IRA in the U.S. appropriates $350 million for help in monitoring and reducing methane emissions. Canada has offered $113 million (CND) for sector decarbonization. WoodMac cautions against over-emphasis on satellite data and suggests improving integration of all data and avoiding duplicative costs for emitters. Addressing the myriad of smaller leaks will remain challenging. Penalties and incentives, carrots and sticks, will both be employed.

 

 

 

References:

Mission invisible: Tackling the oil and gas industry's methane problem. Elena Belletti, Global Head of Carbon Research, Adam Pollard, Principal Analyst, Upstream Emissions, Ryan Duman, Director, Americas Upstream, Fraser McKay, Head of Upstream Analysis, Nuomin Han, Head of Carbon Markets. Wood MacKenzie. November 2023. Mission invisible: tackling the oil and gas industry's methane challenge | Wood Mackenzie

Natural Gas and Decarbonization: Key Component and Enabler of the Lower Carbon, Reasonable Cost Energy Systems of the Future: Strategies for the 2020s and Beyond. Kent C. Stewart. Amazon Publishing, 2022.