IEA calls on companies, governments and regulators to take urgent action to cut methane emissions from oil and gas sector

Methane emissions from the global oil and gas industry fell by an estimated 10% in 2020 as producers slashed output in response to the COVID-19 crisis, according to the International Energy Agency (IEA), which also warns that these emissions could rebound strongly without greater action by companies, policy makers and regulators.

Methane is a much more potent greenhouse gas (GHG) than CO₂ and makes a major contribution to global warming. According to the IEA’s 2021 update of its Methane Tracker, oil and gas operations worldwide emitted more than 70mn tonnes of methane into the atmosphere last year. This is broadly equivalent to the total energy-related CO₂ emissions from the entire European Union.

The new IEA analysis indicates that a large part of the drop in methane emissions in 2020 occurred not because companies were taking more care to avoid methane leaks from their operations, but simply because they were producing less oil and gas. As such, there is clearly a risk that this downward trend will be reversed by an increase in production to fuel a rebound in global economic activity.

Oil production is responsible for around 40% of methane emissions today, with leaks across the natural gas value chain accounting for the remaining 60%, according to the IEA. Upstream oil and gas operations lead to more than 75% of total emissions. The 7.5mn tonne drop in methane emissions in 2020 is equivalent to reducing annual GHG emissions by around 230mn tCO₂eq. In the IEA’s Sustainable Development Scenario, the world requires a steady and rapid decline in emissions for the next 10 years; by 2030, methane emissions are around 70% lower than in 2020. This reduction would be equivalent to eliminating CO₂ emissions from all the cars and trucks across Asia.

The intensity of methane emissions varies widely across countries that produce oil and gas. Based on annual data for 2020, the IEA estimates that the emissions intensity among the worst performing countries is more than 100 times higher than among the better ones. This underlines that many countries should rapidly be able to achieve huge improvements in performance, it says.

‘The immediate task now for the oil and gas industry is to make sure that there is no resurgence in methane emissions, even as the world economy recovers, and that 2019 becomes their historical peak. There is no good reason to allow these harmful leaks to continue, and there is every reason for responsible operators to ensure that they are addressed,’ says Dr Fatih Birol, Executive Director, IEA.

‘Alongside ambitious efforts to decarbonise our economies, early action on methane emissions will be critical for avoiding the worst effects of climate change. There has never been a greater sense of urgency about this issue than there is today,’ continues Dr Birol. ‘To help accelerate these efforts, the IEA is today releasing a “how-to” guide that governments and regulators can use to bring down methane emissions from oil and gas operations.’

The new IEA report, Driving down methane leaks from the oil and gas industry: A regulatory roadmap and toolkit, offers a step-by-step guide for anyone trying develop or to update regulation on methane. Its advice draws on analysis of how more than 50 countries, states or provinces – from the United States to Nigeria, from Iraq to China and Russia – have tackled methane emissions from a regulatory perspective.

IEA analysis highlights that reducing methane emissions is very cost-effective for oil and gas companies. Unlike CO₂, there is already a price for methane everywhere in the world – the price of natural gas. This means the costs of improving operations or making repairs to prevent leaks can often be paid for by the value of the additional gas that is brought to market.

‘We believe that industry must act, visibly and quickly,’ Dr Birol says. ‘But there is also a strong role for government policies; to incentivise early action by companies, push for transparency and improvements in performance, and support innovation in getting results.’

The case for action is not just environmental or reputational. There are increasing signs that consumers are starting to look carefully at the emissions profile of different sources of gas when making decisions on what to buy. ‘A gas producer without a credible story on methane abatement is also one that is taking commercial risks,’ says the IEA.