By Yange Ikyaa
Abatement measures aimed at eliminating pollution due to the release of methane into the atmosphere from petroleum production activities could help in generating revenues of around $45 billion from the sale of captured methane worldwide, said a new report by the International Energy Agency (IEA).
The report described methane abatement in the oil and gas industry as one of the cheapest options to reduce greenhouse gas (GHG) emissions anywhere in the economy. It also stated that Nigeria will need up to $1.5 billion between now and 2030 to reduce methane emissions in the country’s oil and gas operations, while reaping revenues that are far more than the capital invested.
While emphasizing the importance of reducing methane emissions in the global oil and gas industry if countries are to continue exploring fossil fuels for economic development, it further underscored the fact that the abatement measures implemented would generate revenue from the sale of captured methane.
Within the context under review, methane abatement has to do with the application of technologies, which include equipment and operational techniques that can be applied across oil and gas value chains to reduce emissions. This greenhouse gas has a much shorter atmospheric lifetime than CO2 but is much more potent as a greenhouse gas.
Feed additives for cattle, new rice-farming techniques, advanced approaches to oil and gas leak detection, coal methane capture, and modern water and waste facilities can all be effective in atmospheric methane reduction.
The IEA report put the average cost of methane reduction by 2030 at less than $5/tonne of CO2-equivalent, while maintaining that even if there was no value to the captured gas, almost all available abatement measures would be cost-effective in the presence of an emissions price of about $20/tonne CO2-equivalent.
While oil and gas companies are to bear the primary responsibility for abatement, the spending required to cut methane emissions in the Net Zero Emission (NZE) Scenario is less than 2 per cent of the net income received by the industry in 2022, even as private sources of finance can provide capital where internal financing options are limited. This methane-abatement responsibility apportioned to the oil and gas sector may not be unconnected with the fact that the energy sector is responsible for nearly 40% of total methane emissions attributable to human activity, second only to agriculture.
IEA insists that regulations and policies on methane abatement are essential to drive down methane emissions. These can be paired with public financing, either directly from governments or through multilateral development banks, to help catalyze private investments and fill gaps where private sources of finance may not be willing or able to invest at the levels needed.
According to IEA, “of the total spending, we estimate that about $15-20 billion needs particular attention to ensure that adequate sources of finance are available.
“This includes the spending required to cut emissions in low- and middle-income countries, especially those without strong methane reduction policies and regulations, at facilities owned and operated by national oil companies and smaller independent companies, and for measures that do not generate meaningful returns over their lifetimes. This is an appropriate area for focused international action.”
There have been several notable efforts in the past to finance methane abatement. These include international emissions pricing schemes, regional emissions trading markets, sustainability-linked financing, and direct public funding.
However, the IEA report said that “financing initiatives should be tailored to fit targeted projects and reduction goals and be paired with clear accountability frameworks.”
According to the 2023 report, titled: “Financing Reductions in Oil and Gas Methane Emissions,” oil and gas majors operating in Nigeria, the largest economy in Africa, have a responsibility to contribute $300 million to meet the target.
“Also, the Nigerian National Petroleum Company Limited and other investors in Nigeria’s oil and gas industry will have to contribute $700 million and $500 million respectively during the same period,” it further stated.
Historically, there have been challenges in mobilizing this level of investment, including a shortage of funds in some cases, as well as economic and institutional barriers, and a lack of infrastructure. Others are a lack of awareness about emissions and the cost-effectiveness of abatement, the opportunity cost of investment in methane reduction, and capacity gaps in implementation.
Unfortunately, this makes methane emissions to continue rising in oil and gas operations. Methane emissions from the global energy sector rose to nearly 135 Mt in 2022, said IEA, adding that the global energy sector was responsible for nearly 135 million tonnes of methane emissions in 2022, a slight rise from the amount in 2021.
It also reported that coal, oil and natural gas operations are each responsible for around 40 Mt of emissions and nearly 5 Mt of leaks from end-use equipment, and that around 10 Mt of emissions come from the incomplete combustion of bioenergy, largely from the traditional use of biomass.
However, according to IEA, tackling methane emissions from oil and gas operations is one of the most important measures to limit near-term global warming. In its Net Zero Emissions by 2050 (NZE) Scenario, energy-related methane emissions have been projected to fall by around 75 percent to 2030, with two-thirds of it coming from reducing emissions from oil and gas operations. And this could contribute more than 15 percent of total energy-related greenhouse gas (GHG) emissions reductions to 2030.
While just over $75 billion in cumulative spending is required by 2030 to achieve these reductions in emissions, according to the report, the required spending varies widely by geography, operator, and part of the value chain, as around $55 billion is needed in upstream oil and gas facilities and just over $20 billion in downstream operations.
The good news is the fact that there is a huge opportunity to cut methane emissions from the energy sector.
As IEA puts it, “we estimate that around 70% of methane emissions from fossil fuel operations could be reduced with existing technology. In the oil and gas sector, emissions can be reduced by over 75% by implementing well-known measures such as leak detection and repair programmes and upgrading leaky equipment.
“In the coal sector, more than half of methane emissions could be cut by making the most of coal mine methane utilization, or by flaring or oxidation technologies when energy recovery is not viable.”
Therefore, as fossil fuel operations generate over one-third of all methane emissions from human activity, action on methane is therefore one of the most effective steps that the energy sector can take to mitigate climate change.
This is against the backdrop that global methane emissions from fossil fuel operations increased by close to 5% in 2021 to over 120 Mt, mostly due to the rebound in fossil fuel production. However, under the Net Zero Emissions by 2050 Scenario, which has been captured by IEA in its latest report, total methane emissions from fossil fuel operations have been shown to fall by around 75% between 2020 and 2030.
The possibility of achieving these targets may also lie in the reality that policymakers now have at their disposal some well-established policy tools, which have been shown to be very effective in driving reductions in these emissions in many contexts, including leak detection and repair programmes, as well as technology standards and bans on non-emergency flaring and venting.