Oil and gas companies have the potential to significantly reduce their greenhouse-gas emissions by investing a small portion of their earnings in minimizing methane releases, according to the International Energy Agency (IEA). In their latest report, the IEA suggests that an investment of $75 billion from oil and gas companies between now and 2030, equivalent to 2% of their annual net income, could cut the energy sector’s direct greenhouse-gas emissions by 15% by 2030 and pave the way for achieving net zero emissions by 2050.
The investment allocation would involve approximately $4 billion from listed international producers, while the remaining portion would be split between nationally owned companies and smaller independent producers, with 60% of the latter based in North America.
Methane, a significant contributor to global warming, has a greater impact on global warming than carbon dioxide. Methane emissions are responsible for approximately 30% of the increase in global temperatures since the Industrial Revolution, according to the IEA.
The energy sector is responsible for 40% of human-caused methane emissions, primarily released as a byproduct from oil and gas companies. These companies often intentionally release or burn off unneeded methane in a process called flaring.
To address methane emissions, the Biden administration’s Inflation Reduction Act includes a plan to charge oil and gas companies for these emissions, along with a budget of nearly $1.6 billion to help these businesses reduce their methane emissions. Additionally, both the U.S. and the European Union have committed to reducing global methane emissions, with the U.S. Methane Emissions Reduction Act Plan implementing tighter regulations, enhanced transparency, and incentives including a $47 million fund for research on methane emission reduction technologies.
Despite these initiatives, energy companies in the U.S. have expressed concerns over the costs associated with reducing methane emissions, especially as President Biden has called for increased oil production to address high energy prices.
The IEA recommends more comprehensive measures, including a ban on intentional methane releases except in emergency situations. The agency states that methane abatement in the oil and gas industry is one of the most cost-effective options for reducing greenhouse-gas emissions globally. However, progress in this area has been slow, despite record profits for the industry in 2022.
Methane emissions have increased for the third consecutive year in 2022, nearing a record high. Although the industry has pledged to reduce methane releases, emissions from the energy sector reached 135 million metric tons in 2022, slightly above the previous year but still lower than the prepandemic levels.
According to the IEA, the projected $75 billion investment to cut methane emissions would allocate $55 billion to upstream production (exploration and extraction) and $20 billion to technologies targeting downstream production (refining and processing). This investment would enable oil and gas companies to identify and repair methane leaks promptly, as well as upgrade older infrastructure that is prone to leaking.
Other measures could involve investing in technology that captures released methane for energy use or sale. The IEA estimates that energy companies could earn around $45 billion from the sale of captured methane between now and 2030, which would help offset the initial investment costs.
However, implementing these efforts may be challenging in poorer nations, where nationally run oil companies or small independent producers lack the necessary funds or motivation to invest in methane emissions mitigation technologies, according to the IEA. These nations account for approximately $15 billion to $20 billion of the total $75 billion investment, creating a financing gap that would require international efforts from governments, large energy companies, or charities to fill.
The top two methane emitters globally, including all sectors such as agriculture, are China and India. The United States ranks third, followed by Russia, Brazil, and Indonesia, respectively.
In conclusion, it is evident that reducing methane emissions in the oil and gas industry is a crucial step towards curbing climate change. The IEA’s recommendations highlight the potential for substantial emission reductions with a relatively small investment. However, concerted efforts from governments, companies, and organizations are necessary to overcome financial and implementation challenges and ensure a sustainable future.
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