Last November at COP26 over 100 countries committed to the ‘Global Methane Pledge’ vowing to cut worldwide emissions of methane by 30% by 2030, relative to 2020 levels. The pledge signaled that methane monitoring is now top of mind among global leaders and for the oil and gas industry it foreshadows that higher expectations are on the horizon for monitoring, reporting, managing, and verifying methane emissions.
In the past it was extremely difficult for oil and gas operators to measure methane emissions accurately. However, thanks to technological advancements we can now measure emission rates below 1 kilogram per hour, allowing for accurate direct measurement of how much methane is being released into the atmosphere during production and transport. In turn, these technology advances have sparked increased demand from stakeholders for more robust checks on environmental performance.
Of course, as producers begin putting in place new systems to monitor and manage their methane emissions it is crucial that oil and gas companies have their voices heard on the pain points they are experiencing so technology can support their path forward. We worked with the team at oil and gas consulting firm EnerCom who formally interviewed eight producers with diversified shale assets in the Haynesville, Permian, Rockies, Marcellus, and Eagle Ford basins, to better understand their perspectives on methane monitoring, and how it is prioritized within their broader operational and emissions management frameworks.
As these markets are evolving, we wanted to share some of what we learned. (Note: all responses were blinded to Project Canary who sought a transparent and direct point of view from producers).
Market Perception
ESG, methane, and GHG monitoring is fully supported by the Board of Directors and senior management teams of each company that was interviewed. With that said, the attention and focus on addressing fugitive and leaked methane has accelerated recently, driven by investor concerns and regulatory pressure.
Within companies, the responsibility for ESG varies significantly. Some firms have a standalone ESG department, while others rely on professionals from multiple groups, including HS&E and operations. Decisions around ESG are typically very collaborative, with all departments working together to evaluate solutions and provide detailed assessments to senior management and Boards to create a consensus on decision-making.
Responsibly Sourced Gas
The definitions of Certified Gas, Next Gen Gas, Low Emissions Gas, Responsibly Sourced Gas, and Clean Gas are currently viewed as being the same. However, the terms are evolving and growing in distinction as the market develops.
Respondents believe the industry will not be able to self-certify, rather, the market will demand third-party, independent certification and verification. Operators believe there will be multiple options for certification over time and that there should be a dynamic view of high-flow and low-flow wells.
Producers are not counting on there being a direct “economic benefit” to certifying gas. Operators are likely to pursue this path “with or without [RSG] premiums.” In addition, some believe there may be no uplift for certified gas, but in the future, we will see a deduction for gas that is not certified.
Monitoring Technology
Apart from 1-2 of the smaller operators interviewed, most companies are familiar with the range of technology in the marketplace. A recurring theme was that each technology has its beneficial application for operators, while each company has different monitoring and reporting strategies and needs.
Meanwhile, operators universally highlighted the importance of equipment availability and reliability. They also discussed the need to be able to seamlessly integrate data from monitoring equipment into existing systems to allow for meaningful and actionable reporting.
Finally, methane monitoring is still a burgeoning industry and operators continue to look for signals on where the market will place importance, which will influence future spending on monitoring technology. Operators are also hopeful that as the industry evolves, pricing will decrease.
Conclusion: The ESG Case for Methane Monitoring
ESG is no longer a nice to have, it’s now a business imperative. For oil and gas companies, whose operations are increasingly assessed through an ESG lens and attracting top talent needs a fact-based approach to the energy transition, implementing a robust methane monitoring program needs to be at the top of the agenda. More and more firms are beginning to recognize the value behind possessing a strong brand reputation, and having a certification program and robust methane monitoring system in place will strengthen investor confidence and help to secure access to capital from banks.
While some companies may be concerned about the expense of continuous monitoring, cost-benefit analysis shows that taking a long-term view by building resilience against risks to brand reputation and business models and futureproofing against emerging legislation can deliver bottom line savings. And as more and more states introduce new regulatory requirements on methane emissions it can pay off to be leading the pack instead of being behind the curve.
Finally, greenwashing and disingenuous actions by firms are being called out more than ever before. This
highlights the need for independent third-party verification and certification and a detailed audit to satisfy outside stakeholders.