Divestments driving methane emission reductions in oil and gas sector

While some of the largest oil and gas producers have lowered their emissions in line with sustainability goals, a large portion of those reductions come from divestments, according to recent analysis by GlobalData. The market analyst also forecasts global oil and gas production will increase by 8% by 2026 and says that more needs to be done to ensure methane emissions do not rise as well.

Miles Weinstein, Energy Transition Analyst at GlobalData, comments: ‘When emissions are reduced by divestment, those emissions have not disappeared but have simply moved around. Emission intensity has been reduced in many cases, but, in the face of increasing production, more efforts will be necessary to meet national and international climate targets. After all, the oil and gas industry is responsible for around a quarter of methane emissions globally.’

GlobalData’s latest report reveals that Hilcorp Energy has been the largest methane emitter among upstream operators for the third year in a row, with reported methane (CH₄) emissions of 3.4mn tCO₂e in 2020, and has the highest emission intensity among top emitters, at 11mt CO₂e/boed. Meanwhile, Energy Transfer, a midstream company, is the largest emitter overall with 6.1mn tCO₂e.

Weinstein continues: ‘Hilcorp’s emission intensity tripled in 2017, the same year a large number of wells were acquired from ConocoPhillips. Meanwhile, ConocoPhillips’ emission intensity decreased 50% that year. Other companies have shared similar strategies that rapidly reduce their own emissions without greatly affecting the net total. However, many of the same companies do have plans in place to make real emission reductions using technological improvements.’

The US is the second-largest methane emitter from oil and gas operations, at 12.3mn tonnes, with Russia leading the field at 12.9mn tonnes. Studies have suggested that the scope of the methane problem is larger than government reports have led people to believe due to the limitations of current measurement techniques, says GlobalData.

The sector activities responsible for most of the emissions are oil and gas production, gathering and boosting, and natural gas distribution. Much originates from gas venting from various equipment types and equipment leaks. Weinstein, notes: ‘Offshore oil and gas and onshore crude oil production are the sectors with the most potential for low-cost emissions abatement, in part due to their lower production of natural gas relative to oil. Meanwhile, onshore gas and downstream operations would have higher average costs, as natural gas has a predominant role in production, transportation and processing.’

With the recent announcement of the Global Methane Pledge at COP26, the US Environmental Protection Agency (EPA) released proposed rules to regulate methane from existing sources for the first time. The regulation includes monitoring and fixing of leaks, especially where large leaks are likely, as well as regulations and emission limits on specific equipment. The regulation is expected to reduce methane emissions by 74% from 2005 levels by 2030. If approved, it would take effect in 2023.

The proposed regulations have much wider coverage than current ones, which applied to new sources only and did not result in significant reductions. The new regulations take a performance-based approach in some cases by allowing companies flexibility in the methods they use to meet the requirements. This is thought to be more effective than a prescriptive, one-size-fits-all approach.

Figure 1: Top methane emitters for upstream activities
Note: Emissions intensity is not always calculated due to a lack of reliable data from private producers
Source: GlobalData