Establishing a Measure to Achieve Near-Zero Methane Waste from Global Oil and Gas Assets

Here is a durable metric that can help.

The race is on to curb methane emissions and prevent energy waste through oil and gas supply chains. A readily quantifiable and comparable methane intensity metric is sought after to meet this goal. Adopting such a robust metric will permit market actors and policymakers to assess companies, countries, and assets and comprehensively differentiate oil and gas methane intensities worldwide.

The amount of methane waste generated when oil and gas are produced, processed, and transported is a critical consideration in a growing number of applications. Corporate target setting and reporting, financial sector investment guidance, insurance underwriting, and policy implementation all factor oil and gas methane emissions and waste into their decision making.

The leading metric to track and evaluate methane performance comparatively across the oil and gas industry is methane intensity. The most discoverable and widely applicable methane intensity metric evaluates methane emitted relative to total oil and gas commodity output. Establishing a single, measurable methane intensity metric for oil and gas systems offers harmonization and practicality while providing a comparable assessment of an entity’s methane performance. Establishing a leading metric has additional benefits: it is easy to calculate and report, can serve to support other approaches, and is applicable to other performance-based frameworks.

Parsing oil and gas

 There is no standard oil or gas. Petroleum resources — and their resulting emissions intensities— are highly variable, defined by their disparate physical and chemical makeups, diverse corporate practices, inconsistent regulatory oversight, dynamic economic prospects, and powerful geopolitical factors.

Oil and gas co-exist underground together and are normally produced together. As such, it’s rare for gas to be extracted alone. Even “dry” gas stores can consist of liquid hydrocarbons that make plastics, liquid petroleum gas for cooking, petrol, and jet fuel. On average, one-half of the petroleum industry’s emissions footprint comes from methane. However, equivalent barrels of oil and gas emit varying amounts of methane that vary by over an order of magnitude, as plotted below. Further differentiation finds that assets that primarily produce gas (leftmost bars) as well as those assets that primarily produce oil along with associated gas (rightmost bars) have a significant share of their emissions intensity from methane waste. As such, future policies must attend to venting, fugitives, and flaring along both the oil and gas supply chain to be effective.

Establishing a readily measurable methane metric

The volume output of global oil and gas is an easily discoverable basis for assessing methane intensity. Barrels of oil and cubic meters of gas trade in massive volumes every day. And these oil and gas volume outputs are widely reported by countries and companies — and by fields and basins — around the globe.

A volume-based methane intensity considers the methane emitted within an established system boundary compared to the combined oil and gas volume marketed within the same boundary. As such, the volume-based methane intensity is calculated as the mass (kilograms) of methane emitted per volume throughput in barrels of oil equivalent (boe oil and gas).

It is also possible to convert a volume-based methane intensity to an energy basis. A common version of the energy-based methane intensity is calculated as the mass (grams) of methane emitted per energy throughput (megajoule oil and gas).

The following plot compares volume-based methane intensity metric to an energy-based metric for nearly three-quarters of global oil and gas supplied and modeled by RMI using the Oil Climate Index plus Gas (OCI+). The volume-based and energy-based metrics are relatively comparable. The major difference between these dual metrics is discoverability. While volumes are widely and publicly reported, the energy content of oil and gas is not systematically disclosed.

Other methane intensity metrics

Some policies and previous studies focus solely on methane leakage from gas only. These metrics consider how much gas throughput ends up in the atmosphere and not in the market. This metric — the gas loss rate — is calculated as the share of gas emitted compared to gas sold (or gas throughput). When the methane content of the gas is known, this can be expressed as a percentage of methane loss rate.

Calculating a methane loss rate requires disclosure of the methane content in gas. This is critical because, while gas composition is often assumed to be about 90 percent methane, the share of methane in gas can vary widely from less than 70 percent to over 98 percent. Methane content is also influenced by the location of a methane release in a system: The closer the discharge is to the wellhead, the lower the methane content can be because gas contains variable amounts of non-methane hydrocarbons and other impurities when it is extracted. The closer the gas leak is to distribution and end use, the higher the methane content because heavier hydrocarbons and impurities have been removed.

Gas loss rate is best applied to dry gas assets, which are rare. When gas systems contain significant liquids, the gas loss rate can result in an abnormally high methane intensity. Since most global upstream production assets contain oil and gas, the gas loss rate (while illustrative for gas transport and transmission systems) is not a robust measurement for upstream oil and gas production comparisons.

The graph below plots gas loss rate versus the volume-based methane intensity for nearly three-quarters of the world’s oil and gas assets that are currently modeled through the OCI+. This analysis finds that those resources designated as “gas” (which includes dry, wet, and sour gas) have fundamentally different methane intensity profiles than those resources designated as “oil” (which includes condensates, ultra-light, light, medium, heavy, and extra-heavy oils). While there is a close relationship between these different intensity metrics for gas assets, there is no relationship between these independent metrics for assets that contain liquids or primarily consist of oil.

Unlike volume-based and energy-based methane intensity metrics, which are closely comparable, there is little to no relationship between a volume-based metric and the gas loss rate.

 

There are yet other metrics, in addition to methane intensity, that are needed to prevent energy waste. For example, operators should strive to flare less of their gas and keep their flares maintained at high efficiency when they must burn off unwanted gas. These are each evaluated in the OCI+ mitigation scenarios.

 Differentiating countries’ methane intensities

 Oil and gas producing countries have highly variable average volume-based methane intensities. Moreover, the span in these methane intensities within a country is also wide ranging. Countries like Norway, for example, have both very low average methane intensity and a small range between their different oil and gas assets. Other countries, like Algeria and Venezuela, for example, have both high average methane intensities and a large range between their different oil and gas assets, as plotted below.

The economic value of methane policy

 Historically, gas was viewed as an unwanted waste byproduct that was extracted along with oil. It was systematically flared and vented to maximize production of liquids. Today, gas is a highly traded global commodity with significant economic value.

The high price of gas in Europe and Asia is roughly five times greater than in the United States. This should be sufficient to warrant market action for low-leakage gas that minimizes waste and maximizes its market return. The International Energy Agency finds that at least 50 percent and as much as two-thirds or more of wasted gas is cost-effective to capture, depending largely on the price of gas.

But energy markets are dynamic, and gas prices vary over time and place. Operators’ vigilance also varies widely. Capital investments can be sluggish. Upsets happen. As a result, progress toward abating methane waste and gas loss has been too slow — but targeted demand-side policy can help unlock the investments and operational changes needed to accelerate reductions and modernize the oil and gas industry.

 Next steps for establishing methane intensity metrics

 Directives are loud and clear. Whether its Oil and Gas Decarbonization Charter (OGDC) targets, methane abatement financial metrics, or EU methane regulations, methane intensity is a critical market and policy benchmark. Insurance companies are already using methane intensity as an underwriting guideline to gauge system safety. And other financial actors like banks and investors are following suit.

There is a growing need for more transparency and harmonization across methane intensity methodologies. This starts with a clearcut metric. Inputs need to be discoverable to be actionable. This points to a volume-based methane intensity metric that can be broadly applied globally across suppliers and use cases.

Spurring reductions in methane from oil and gas requires a combination of policy push and market pull. These dynamics shine a spotlight on the importance of durably designing and implementing a robust and comprehensive metric that can openly and comparatively track the methane intensity of oil and gas through the supply chain.

If major gas and oil buyers in Europe and Asia adopt policies to prevent gas waste — and US states like California, Michigan, and New York, for example, follow suit — entities supplying oil and gas will follow suit to produce commodities with low methane leakage. Together, these actors can cut energy waste, bolster national security, create jobs, protect public safety, and prevent super-heating the planet.