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New Energy World
New Energy World embraces the whole energy industry as it connects and converges to address the decarbonisation challenge. It covers progress being made across the industry, from the dynamics under way to reduce emissions in oil and gas, through improvements to the efficiency of energy conversion and use, to cutting-edge initiatives in renewable and low carbon technologies.
Methane capture projects increasingly economic
11/1/2023
News
Current natural gas prices, including record high global prices, coupled with renewed concerns for energy security, are making projects that capture and commercialise vented, fugitive and flared methane increasingly economic, according to new analysis from S&P Global Commodity Insights.
The analysis examined six key regions – North America, North Africa, Central Asia-China, Nigeria, Australia-ASEAN, and Eastern Mediterranean – and found that the elevated price outlook for natural gas makes it economic to capture and commercialise more than 70% of the lost methane and flared gas from those areas, equivalent to 80bn m3 of new supply.
Notably, the analysis finds that it could be possible to add 40bn m3 of new supply – more than the total annual demand of France – to global markets within just 2–3 years.
Methane emission reductions are particularly critical to limit near-term warming as methane is a highly potent, short-lived climate pollutant (with over 80 times more global warming potential than CO2 over a 20-year period) and is estimated to have contributed roughly 30% of global warming to date.
The spike in global gas prices – which began in autumn 2021 and were then amplified by the conflict in Ukraine during 2022 – have particularly enhanced the near-term economics for methane capture projects in regions that have access to the global gas market, the analysis finds.
For a methane capture project deployed in 2023, 10-year revenues are now expected to be 140–240% higher than they otherwise would have been prior to the price spike. Even as natural gas prices stabilise in the longer term, forecast revenues remain elevated compared to pre-war price forecasts (56–93% higher for a project deployed in 2026 and 31–38% higher for a project deployed in 2030).
Eleonor Kramarz, Vice President – Energy Transition Consulting, S&P Global Commodity Insights, comments: ‘The elevated price outlook for natural gas has created a substantial economic opportunity to capture flared gas and methane emissions, especially in the near term. While these opportunities will remain economic over the longer-term, the strongest incentives are for acting sooner rather than later when it comes to bringing new projects online.’
Advancing methane and flare capture and commercialisation projects benefit from well-established technologies that already exist at scale, meaning that there are few technological barriers to deployment, the analysis notes. Still, other impediments need to be overcome.
The analysis identifies key barriers for each of the six target regions across four major categories – export capacity, capital availability, commercial and financing environment, and security risk – and lays out pathways that would enable projects to move forward.
‘While the paths forward will be different in each region, there is a consistent need for clear project implementation roles, stronger collaboration between private and public organisations and improved capital availability. Bringing together key constituencies will be essential to address barriers and deliver new sources of supply that can strengthen energy security while reducing emissions,’ Kramarz adds.
