2024: Reducing methane emissions is a more low-hanging fruit than cutting emissions of carbon dioxide
Methane emissions from the energy sector have moved high up on the agenda among governments, operators, and other stakeholders such as investors in the past couple of years. Methane is the second-biggest contributor to climate change, and since the gas is a potent air pollutant with high global warming potential, it has to be tackled in the short term to help prevent the much-discussed climate tipping points.
Read our special insight from Magnus Kjemphol Lohne, SVP and Head of Sustainability at Rystad Energy.
Recent developments in measurement technologies such as satellite imagery reveal that methane emissions probably are substantially higher than earlier anticipated. In addition to being a climate threat, venting and leakages of methane are also a waste of valuable resources that in most cases can be avoided. As a result, measures to limit methane emissions are gaining increasing attention across the industry.
Reducing methane emissions is generally a more low-hanging fruit than cutting emissions of carbon dioxide, and therefore has the most promising potential for the energy sector in the short and medium term – provided the emissions are detected. The industry has embarked on a number of projects and initiatives to measure, report, and reduce methane emissions, such as the Global Methane Pledge, the UN Environment Programme’s International Methane Emissions Observatory, and the Oil & Gas Methane Partnership 2.0. From a regulatory perspective, however, actual requirements to reduce methane emissions are few and far between. The first significant regulation came last year with the US Inflation Reduction Act, which includes a methane emissions reduction program imposing a first-time methane fee. Another example is Norway, which has a tax covering both carbon dioxide and methane.
New regulation targets methane emissions in the energy sector and global supply chains
Now the European Union is following up with its first-ever regulation to reduce methane emissions in the European energy sector and global value chains, announced on 15 November. This is an important step towards delivering the European Green Deal and reducing net EU greenhouse gas emissions by at least 55% by 2030. The new regulation, which still requires formal approval by the European Parliament and Council, will oblige companies in the fossil gas, liquids/oil, and coal industry to properly measure, monitor, report, verify, and take action on methane emissions within the EU. The new regulation will also have consequences for imports into the EU: as of January 2027, new important contracts for oil, gas and coal can only be concluded if exporters comply with the same monitoring, reporting, and verification obligations as EU producers. New contracts will also have to stay within a maximum methane emission level.
The new EU regulation is an important step forward for tackling methane emissions in the oil and gas value chain, both within the EU and globally. Two key elements of the new regulation are the obligations related to measurements/verification and data transparency. Scarce and low-quality methane data has been one of the key challenges to curb emissions of this greenhouse gas. The trend over the past couple of years has been positive as more operators deploy methane on-site monitoring equipment and use other measurement technologies such as aviation and satellites – but even so, most reported data is still based on simple emission factors for facilities and equipment located on-site.
Rystad Energy emissions database
Rystad Energy believes that data transparency and quality are key in curbing methane emissions in the oil and gas industry. We have therefore developed a consistent, field-level, upstream oil and gas methane emissions database that incorporates and combines publicly available methane data, proprietary facility-level estimations, and global satellite data measurements in a consistent manner. The database is continuously updated with the latest available information – also from satellite detections.
Rystad Energy’s upstream facility information enables us to contextualize the satellite data by matching it with reservoir boundaries and facility locations, which allows us to allocate methane plumes to specific oil and gas fields. Combined with related information such as operatorship, ownership, production, field type, development solution, and many other dimensions, this is an essential first step in combining the best granular data that is available at a global scale – but it is only a start. Increased transparency around methane performance on a granular level is needed to combat emissions, which means governments are likely to implement more stringent policies and regulations to accelerate the pace of monitoring, detection, validation, and reporting.