COP26 and the Energy Transition: Supply Decarbonisation and Methane Emissions

As CoP26 continues, 105 countries including the UK, US and the EU agreed on Tuesday to reduce methane emissions by 30% by 2030.  Methane is some 80 times more effective at trapping heat than CO₂ over a twenty year period (as it only stays in the atmosphere for 10 to 12 years) and the Global Methane Pledge, if fully implemented, could limit global warming by c. 0.2°C by 2050.  Over half of methane emissions globally are human caused – predominately by agriculture (40% of human-caused methane emissions), energy (35%) and waste (20%).  According to data released by the International Energy Agency (IEA), oil and gas operations are likely the largest source of methane emissions from the energy sector.

As set out in my blog last week, the first key outcome of the North Sea Transition Deal is Supply Decarbonisation which includes the development of a Methane Action Plan.  The Methane Action Plan published by Oil & Gas UK which includes:

• a commitment to halve methane emissions by 2030;
• operators being required to produce individual Methane Action Plans for each asset by Q4 2022; and
• an aim to achieve the World Bank’s Zero Routine Flaring by 2030 initiative. 

According to IEA data routine/’non-emergency’ flaring and venting amounts to c. 20% of the industry’s current methane emissions globally.  It is estimated, for example, that in 2020 there was 142 billion cubic metres of natural gas flared which is roughly equivalent to the natural gas demand of Central and South America. 

Routine flaring is the burning of natural gas that is produced as a by-product of oil extraction – this natural gas needs to then be exported from the extraction site (requiring capacity in gas pipelines), used onsite for operational energy or reinjected into the reservoir (either as part of oil extraction or for storage).  Routine flaring or venting occurs when operators have been unable to adopt one of these options and the natural gas is burned (flared) or released (vented).  Vented natural gas is significantly worse for climate change than flaring (as the latter breaks the, predominantly methane, natural gas down into CO₂ and water). 

The IEA estimates that existing technologies can reduce the industry’s global methane emissions by 75%.  It further estimates that a c. 29% reduction of the industry’s potential methane emissions in the UK could be done on a no net cost basis (as the methane not emitted is itself a valuable resource).  The most cost effective solution in the UK identified by the IEA (with a cost of negative 6.6 USD/MBtu) is replacing pumps and controllers used in offshore oil production which, by design, vent natural gas as they are used with instruments which pressurise and use the ambient air.

The OGUK’s Methane Action Plan sets out that operators should consider recovery of the waste natural gas which would have been flared/vented for sale or, if platforms cannot be fully electrified, used to generate power for the platform.  Internationally, other uses for such waste natural gas have also included generating electricity but rather than for powering the production facility it has been used to power nearby cryptocurrency (such as Bitcoin) mining facilities.  

We will continue to follow developments at CoP26 and explore more of the key outcomes of the North Sea Transition Deal in coming weeks.