Methane Leaks Are Burning Oil And Natural Gas Producers — But They Are Not Sitting Still

FILE – This July 27, 2011 file photo shows a farmhouse in the background framed by pipes connecting pumps where the hydraulic fracturing process in the Marcellus Shale layer to release natural gas was underway at a Range Resources site in Claysville, Pa. In Pennsylvania’s fracking boom, new and more unconventional wells leaked far more than older and traditional wells, according to a study of inspections of more than 41,000 wells drilled. And that means that that methane leaks could be a problem for drilling across the nation, said the author of the study, which funded in part by environmental activist groups and criticized by the energy industry. The study was published Monday by the Proceedings of the National Academy of Sciences. (AP Photo/Keith Srakocic, File)

</div> </div> <p class="p1"><span class="s1">The Italian oil and gas company ENI has set out to cut its fugitive emissions from production by 80% by 2025, relative to a 2014 baseline. It was nearly halfway there in 2016, meaning it should hit its mark six years ahead of schedule. </span></p> <p class="p1"><span class="s1">The largest such escaping emission is methane, which is 72-times more powerful than CO2 when it comes to trapping heat in the atmosphere. And oil developers are getting dead serious about limiting their methane releases because they are also in the natural gas business, which is now the hottest fuel in the United States and which has overtaken coal as the leading source to generate electricity. Oil and natural gas are often discovered alongside each other. </span></p> <p class="p3"><span class="s1">“EDF calls on companies to set absolute targets to reduce methane emissions from oil and gas, such as a 75 percent reduction by 2025,” the Environmental Defense Fund said in a white paper just released titled Taking Aim: Hitting the Mark on Oil and Gas Methane Targets. “Producers that instead select an intensity target should aim for 0.20 percent leakage or lower.” </span></p> <p> </p> <p class="p3"><span class="s1">While the environmental group says that most companies are taking steps to limit their fugitive emissions, it notes that few have set hard targets. </span></p> <p class="p3"><span class="s1">It goes on to say that oil and gas developers should tell the public the exact steps that they are taking to reduce their methane emissions. It says that the problem stems mostly from upstream oil and gas operations, as opposed to midstream pipeline networks or downstream energy consumption. It says that the 75% reduction goal is feasible. </span></p> <p class="p3"><span class="s1">Each year, about 75 million metric tons of methane either escapes during the oil and gas production process or is flared — meaning it is burned because the natural gas has no way to get from the well to a production facility. That’s according to the <a href="https://www.iea.org/weo2017/&quot; target="_blank" data-ga-track="ExternalLink:https://www.iea.org/weo2017/&quot; rel="nofollow">International Energy Agency World Energy Outlook</a>, which also says that at least half of those releases could be prevented at no cost to producers with today’s technologies. </span></p>

<p class="p1"><span class="s1">“I would like to stress that we see the methane issue more as a business opportunity than a risk, said Sylvia van Waveren with Robeco Institutional Asset Managemen</span><span class="s2">t. “(</span><span class="s1">M)ethane is a potential revenue source.” </span></p> <p class="p1"><span class="s1"><b>Clear Targets</b></span></p> <p class="p1"><span class="s1">The oil industry has traditionally taken the view that if environmental efforts impede production, then it would have negative economic consequences. Now that the industry is getting burned by methane releases, things are changing. Consider Apache Corp., which is U.S.-based oil and gas producer that is tracking its methane reductions: It is reporting that a 51% drop between 2012 and 2016. </span></p> <p class="p1"><span class="s1">Meantime, <a href="http://www.swncr.com/environment/air/index.html.&quot; target="_blank" data-ga-track="ExternalLink:http://www.swncr.com/environment/air/index.html.&quot; rel="nofollow">Southwestern Energy</a> is another company that is quantifying its results, although it does so by intensity: 0.19% for its upstream oil and gas operations, it says, which is coming by using handheld devices to monitor and measure leaks. It has a goal of reaching a 0.36% intensity target.</span></p> <p class="p1"><span class="s1">Separately, EDF is calling attention to the efforts by <a href="http://www.cdp.net&quot; target="_blank" data-ga-track="ExternalLink:http://www.cdp.net&quot; rel="nofollow">ConocoPhillips, Hess Corp. and Noble Energy</a>. Further, BP, ExxonMobil, Repsol, Shell, Statoil, Total and Wintershall have <a href="https://www.forbes.com/sites/kensilverstein/2017/11/24/big-oil-seeks-to-plug-methane-leaks-and-burnish-its-image/#1995857f1c92&quot; target="_self">pledged</a> to cut their methane emissions while also making the data they use to measure their progress more transparent.&nbsp;</span></p> <p class="p1"><span class="s1">“It is clear that companies are seeing advantages in managing methane – as well as cost savings and revenue increases,”<span class="Apple-converted-space">&nbsp; </span>said Tim Goodman, with Hermes Investment Management. “There are distinct benefits to being a responsible producer – or what is often referred to as having a social license to operate – such as greater credibility with stakeholders and reduced legal and reputational risks.” </span></p> <p class="p5"><span class="s1">While EDF’s focus is oil companies’ production processes, its efforts also have widespread implications for natural gas markets and whether the fuel will continue its dominance in electric generation markets. </span></p> <p class="p5"><span class="s1">Natural gas is not just cheap and plentiful. It also releases about half the CO2 as does coal. That has led to a bigger market share, or 34% of the utility market compared to coal’s 30%. The&nbsp;<a href="https://www.csmonitor.com/tags/topic/Energy+Information+Administration&quot; target="_blank" data-ga-track="ExternalLink:https://www.csmonitor.com/tags/topic/Energy+Information+Administration&quot; rel="nofollow">Energy Information Administration</a>&nbsp;expects natural gas’ share of the electric generation pie to reach 50% by 2035, mostly because of the boom in production from horizontal drilling and hydraulic fracturing of shale gas deposits.</span></p> <p class="p5"><span class="s1">And just as oil development needs to cut its methane leaks, so do natural gas companies. If those fracking and other operations allow more than 3.2% of the methane they produce to escape, then the benefits of switching from coal to natural gas are lost, according to&nbsp;<a href="http://www.forbes.com/colleges/princeton-university/&quot; target="_self"><span class="s3">Princeton University</span></a>.</span></p> <p>There’s a common commitment now to cutting fugitive methane releases from oil and natural gas operations. And while companies realize the risks, their efforts are largely aimless and opaque. If the ultimate goal is to limit temperature increases, setting hard and clear targets would push those developers to do better. And that could potentially improve their brands and outlooks, adding weight to the risk-reward ratio and making the whole endeavor worthwhile.</p>”>

FILE – This July 27, 2011 file photo shows a farmhouse in the background framed by pipes connecting pumps where the hydraulic fracturing process in the Marcellus Shale layer to release natural gas was underway at a Range Resources site in Claysville, Pa. In Pennsylvania’s fracking boom, new and more unconventional wells leaked far more than older and traditional wells, according to a study of inspections of more than 41,000 wells drilled. And that means that that methane leaks could be a problem for drilling across the nation, said the author of the study, which funded in part by environmental activist groups and criticized by the energy industry. The study was published Monday by the Proceedings of the National Academy of Sciences. (AP Photo/Keith Srakocic, File)

The Italian oil and gas company ENI has set out to cut its fugitive emissions from production by 80% by 2025, relative to a 2014 baseline. It was nearly halfway there in 2016, meaning it should hit its mark six years ahead of schedule.

The largest such escaping emission is methane, which is 72-times more powerful than CO2 when it comes to trapping heat in the atmosphere. And oil developers are getting dead serious about limiting their methane releases because they are also in the natural gas business, which is now the hottest fuel in the United States and which has overtaken coal as the leading source to generate electricity. Oil and natural gas are often discovered alongside each other.

“EDF calls on companies to set absolute targets to reduce methane emissions from oil and gas, such as a 75 percent reduction by 2025,” the Environmental Defense Fund said in a white paper just released titled Taking Aim: Hitting the Mark on Oil and Gas Methane Targets. “Producers that instead select an intensity target should aim for 0.20 percent leakage or lower.”

While the environmental group says that most companies are taking steps to limit their fugitive emissions, it notes that few have set hard targets.

It goes on to say that oil and gas developers should tell the public the exact steps that they are taking to reduce their methane emissions. It says that the problem stems mostly from upstream oil and gas operations, as opposed to midstream pipeline networks or downstream energy consumption. It says that the 75% reduction goal is feasible.

Each year, about 75 million metric tons of methane either escapes during the oil and gas production process or is flared — meaning it is burned because the natural gas has no way to get from the well to a production facility. That’s according to the International Energy Agency World Energy Outlook, which also says that at least half of those releases could be prevented at no cost to producers with today’s technologies.

“I would like to stress that we see the methane issue more as a business opportunity than a risk, said Sylvia van Waveren with Robeco Institutional Asset Management. “(M)ethane is a potential revenue source.”

Clear Targets

The oil industry has traditionally taken the view that if environmental efforts impede production, then it would have negative economic consequences. Now that the industry is getting burned by methane releases, things are changing. Consider Apache Corp., which is U.S.-based oil and gas producer that is tracking its methane reductions: It is reporting that a 51% drop between 2012 and 2016.

Meantime, Southwestern Energy is another company that is quantifying its results, although it does so by intensity: 0.19% for its upstream oil and gas operations, it says, which is coming by using handheld devices to monitor and measure leaks. It has a goal of reaching a 0.36% intensity target.

Separately, EDF is calling attention to the efforts by ConocoPhillips, Hess Corp. and Noble Energy. Further, BP, ExxonMobil, Repsol, Shell, Statoil, Total and Wintershall have pledged to cut their methane emissions while also making the data they use to measure their progress more transparent. 

“It is clear that companies are seeing advantages in managing methane – as well as cost savings and revenue increases,”  said Tim Goodman, with Hermes Investment Management. “There are distinct benefits to being a responsible producer – or what is often referred to as having a social license to operate – such as greater credibility with stakeholders and reduced legal and reputational risks.”

While EDF’s focus is oil companies’ production processes, its efforts also have widespread implications for natural gas markets and whether the fuel will continue its dominance in electric generation markets.

Natural gas is not just cheap and plentiful. It also releases about half the CO2 as does coal. That has led to a bigger market share, or 34% of the utility market compared to coal’s 30%. The Energy Information Administration expects natural gas’ share of the electric generation pie to reach 50% by 2035, mostly because of the boom in production from horizontal drilling and hydraulic fracturing of shale gas deposits.

And just as oil development needs to cut its methane leaks, so do natural gas companies. If those fracking and other operations allow more than 3.2% of the methane they produce to escape, then the benefits of switching from coal to natural gas are lost, according to Princeton University.

There’s a common commitment now to cutting fugitive methane releases from oil and natural gas operations. And while companies realize the risks, their efforts are largely aimless and opaque. If the ultimate goal is to limit temperature increases, setting hard and clear targets would push those developers to do better. And that could potentially improve their brands and outlooks, adding weight to the risk-reward ratio and making the whole endeavor worthwhile.

via Forbes.com: Energy News https://ift.tt/2qA6VDx