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

Here are the durable metrics that can help.

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

Methane intensity — 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 need to factor oil and gas methane intensity into their decision making.

Methane intensity can be calculated in numerous ways, however. Without adherence to rigorous approaches, practicality, and harmonization of methodologies, there is a risk that methane intensity metrics will be meaningless or misapplied, and the data generated will not provide a credible indication of an entity’s methane performance. This article analyzes two leading methodologies for calculating methane intensity and highlights how they work together.

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 two different methane metrics

Assessing how much gas ends up in the atmosphere and not in the market is a valuable way to track methane emissions and prevent waste. 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.

Knowing the methane content level is important 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 90 percent.

Methane content is influenced by the location of a methane release in a system: The closer the discharge is to the wellhead, the lower the methane content 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.

A second essential methane intensity metric — volumetric methane intensity — considers the methane emitted based on combined oil and gas throughout certain system boundaries. The methane intensity is calculated as the mass (kilograms) of methane per barrel oil equivalent (boe oil and gas) throughput.

Taken together, these two metrics provide additional information on material differences between comparative methane waste from oil and gas systems operations. The most methane intensive activity is high on both metrics, and the least methane intensive is low on both.

However, when one metric is high and the other is low, these findings trigger increased analysis to offer a complete picture of methane emissions in this diverse and complex sector.
The graph below plots gas loss rate versus the volumetric methane intensity for nearly three-quarters of the world’s oil and gas assets that are currently modeled through RMI’s Oil Climate Index plus Gas (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 are primarily oil. Additionally, for predominantly oil assets with little to no gas, a gas loss rate does not return a reasonable value and is not applicable. Therefore, a comprehensive look at oil and gas methane intensities requires the use of both metrics — gas loss rate and volumetric methane intensity — to fairly assess complex petroleum systems worldwide. This is especially critical for successful implementation to cut down on methane waste sector wide.

It is important to note that 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 methane intensities. Moreover, the range in 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 Russia, 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 — roughly five times greater than in the United States — should be sufficient to warrant significant capture to minimize waste and maximize 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 it’s 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 clearcut metrics. Inputs need to be discoverable to be actionable. The two indicators presented — gas loss rate and volumetric methane intensity — are integral across 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 set of metrics that can accurately 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 start 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.