Managing methane: how tech can help oil and gas recover $30bn in revenue

Methane emissions have 80 times the climate-change effect of carbon dioxide (CO2) over a 20-year timeframe, and are responsible for a quarter of today’s global warming[1]. The oil and gas sector is responsible for a quarter of this output and is under increasing pressure from shareholders, consumers and regulators to improve environmental practices. In addition to that, costs of oil and gas processing are increasing, in the form of regulatory penalties, emissions taxes, and so on, while the industry must also cope with the ‘easy reserves’ having been reached already.

The irony is that methane has value. If captured instead of emitted it could be sold as natural gas – a cleaner energy source than coal – or used in chemicals manufacture. By some estimates, this could recoup as much as $30bn for the industry[2], but the oil and gas sector points out that the upgrades required to capture and take financial advantage of methane that would otherwise be released would often cost more than the value of the gas collected.

Now, new technologies, such as drones and advanced sensors, are making it easier to monitor leaks and cut emissions, putting the industry in a position to recover the lost revenue that each year’s methane emissions represent.

To take advantage of changing technologies, and allay shareholder and regulatory pressure, different approaches are needed depending on the types of emissions involved. Vented emissions are released deliberately, usually for safety reasons, such as when methane builds up in tanks of liquid gas, or when it is used to move mechanical parts in plants that have no other power sources. Removing the need for venting typically requires costly plant changes so that methane that builds up in storage tanks, for example, can be captured and transported long distances to where it could be put to profitable use.

Flaring is the process of burning excess or unwanted methane, turning it into CO2. Often, because methane is inexpensive, it is blown down pipes to clear them of accumulated debris and blockages, and burnt off later. Here, too, the challenge is to make it cost effective to collect, store and transport the flare gas, rather than burn it off. The industry is now putting more emphasis on reducing flare. For instance, the Oil and Gas Climate Initiative, which counts more than a dozen major oil and gas companies as members, has declared a target of zero routine flaring by 2030.

Finally, there are fugitive emissions – unintentional releases from leaks or faults. Companies often do not know the extent of these until a fault is discovered, and they may leave repairs until the next scheduled maintenance because an emergency fix is not cost effective. EPA regulations state that repairs must be conducted within 30 days of finding a leak[3]. Fugitive emissions are not monitored as strictly as venting and flaring, but some estimates suggest that more than two percent of all gas produced is lost through leaks[4].

Some of these leaks are obviously costly, such as the Aliso Canyon leak of 2015-16, which had an estimated cost of more than $1bn[5]. And yet, estimates suggest that up to half of all methane leaks could be fixed profitably, or at no cost. Research puts the lost revenue at more than $30bn, or around 3 percent of global natural gas production[6].

Various technological approaches are now focused on either reducing emissions or capturing more of the released methane. One option is improving flaring efficiency so that a greater percentage of the methane is turned into CO2. BHGE’s FlareIQ advanced control algorithm can help customers by measuring features of the flare, such as temperature, velocity and pressure, then control flare-assist systems to optimize efficiency. When flare systems are not present, it provides transparency into operations so plants can improve the efficiency of their processes. Improved flaring can cut up to 12,100 metric tons of CO2 equivalent emissions per flare annually.

Another solution under consideration is to improve leak detection so that fixes can be implemented more quickly. Ground and drone-based sensors, such as BHGE’s LUMEN equipment, provide a more complete picture of what is happening. A drone can survey a site more quickly than a manual inspection and detects methane leaks using an optical gas-imaging camera and laser imaging. The ground sensors create a continuous, wireless monitoring network around a site – inside and outside – and give customers feedback on the methane leaks they find, anywhere on the site.

In one example, a Canadian oil and gas company wanted to understand why one of its plants experienced more fugitive emissions in summer. The problem was severe enough that the gas was getting into the air-conditioning system and forcing regular shutdowns. A sensor network would have helped it trace the source of the problem more quickly.

Now, it is not just technology that is providing an incentive to better tackle leaks, but shareholder action, too. Investors in listed companies in every sector are bringing resolutions calling for improved environmental action, such as lower emissions. It is not just a question of sustainability, but increasingly one of long-term viability; companies right across industry are understanding that future growth and prosperity are becoming more linked to environmental, social and governance practices.

Shell has recently agreed to link executive pay to emissions targets, following pressure from investors including the Church of England[7]. Similar pressure led to BP agreeing, in February 2019, to publish more details of how its operations, including emissions policies, align with the Paris climate agreement[8].

In March, after months of pressure, ExxonMobil announced a 40 percent reduction in methane leaks over 18 months. Its investors, including New York State, want more; they are continuing to push for an independent chairman[9].

Other energy companies, including Norwegian firm Equinor and US company Chevron, have faced similar challenges from investors and there is no reason to think these will cease[10].

Across oil and gas, executives are increasingly determined to tackle emissions. Fortunately, the technology now exists to help them do so more cheaply – and there are billions of dollars in rewards to be collected.  

[1] https://www.sciencedirect.com/science/article/pii/B9780128118740000052

[2] https://rhg.com/research/untapped-potential-reducing-global-methane-emissions-from-oil-and-natural-gas-systems/

[3] https://www.epa.gov/sites/production/files/2016-09/documents/nsps-overv…

[4] https://www.cnbc.com/2018/07/06/the-us-natural-gas-industry-leaking-way…

[5] https://www.reuters.com/article/us-sempra-alisocanyon-natgas/socalgas-r…

[6] https://rhg.com/research/untapped-potential-reducing-global-methane-emi…

[7] https://www.ft.com/content/de658f94-f616-11e8-af46-2022a0b02a6c

[8] https://www.theguardian.com/business/2019/feb/01/bp-to-explain-how-busi…

[9] https://www.ft.com/content/5acb32f8-6f4a-11e9-bbfb-5c68069fbd15

[10] https://www.ft.com/content/baffdc7a-6656-11e9-9adc-98bf1d35a056