Gas flaring flagged at International Energy Week as a major opportunity to combat climate change
This article was originally published here, but was also published (by special request) on the website of the Energy Institute here.
London played host to the International Energy Week conference, which brought together energy professionals to discuss the challenges facing the industry. The focus was on the triple challenges of affordability, security, and decarbonization, and there were representatives from across the industry, including new and old players from a variety of geographic locations.
The discussions at International Energy Week focused on new energies such as wind, solar, batteries, hydrogen, e-fuels, electricity grids, and energy efficiency. However, one area that was highlighted as a quick win for decarbonization was the existing operations of the oil and gas industry.
The industry leaders who attended the conference identified gas flaring as the biggest opportunity for reducing supply chain emissions from venting, flaring, and leaking gas. Bjørn Otto Sverdrup, the chair of the Oil and Gas Climate Initiative, opened the conversation by stating that “flaring and methane is a 3 gigatonne problem” for oil and gas, and emphasized that “it’s up to us to solve it – no one else is going to step in“. [Incidentally, we think the opportunity is even bigger – we use a 20-year “Global Warming Potential” of methane, not a 100-year – see Figure 1].
Globally 275 bcm of gas is currently flared, vented and leaked (that’s 1.7x what Europe imported from Russia in 2021), leading to a revenue opportunity of up to $120 billion at today’s prices (or EUR 40 per MWh), and a potential saving of up to 7.1 billion CO2-equivalent tonnes of greenhouse gases. That’s the equivalent of up to 1.5 billion cars (see our article “how big is the flaring, venting and leaking gas opportunity?” for details).
In detail, Robert West, CFA (an industry analyst) highlighted last week (informed by Capterio data) that “there are some barrels for which the scope 1 emissions are greater than the scope 3 emissions” which is, he says “insane”.
At a time when the world urgently needs more can in a market that Namit Sharma (practice leader at McKinsey) says has no spare capacity in gas, it’s imperative that we waste molecules no more. (Incidentally, we would differ with Namit – there is an untapped supply source that is already on production today – this wasted gas).
Yet, as the International Energy Agency (IEA) last week said in its global methane tracker, the overwhelming majority of this volume can be fixed using proven technology today whilst also making money. The remainder can be solved at a cost of less than $15 per tonne.
The good news is that many actors are already leaning in. It’s very encouraging to see the progressive leadership of the OGCI and its members, under the leadership of Bjorn Otto (Chairman of the Executive Committee, OGCI). On stage, Sophie Depraz (Deputy Executive Director, Ipieca, a trade association) outlined their work with their members to reduce flaring together with partners from the World Bank’s Global Gas Flaring Reduction programme, the Methane Guiding Principles, and more.
Equally, Shell’s Hugues Bourgogne (EVP Safety, Environment & Asset Management) outlined their progress too, highlighting how routine flaring was 13% in 2021 (down from 60% in 2010) and how it is on-track for zero routine flaring by 2025 (for its operated assets, that is). Hugues went on to outline the critical importance of emission detection, quantification and reporting. The importance of accelerated progress was also highlighted by Mark Thomas (CEO of Bahrain’s NOGAHOLDING group), and Alasdair Mackenzie (Director, Strategy, Planning & Business Development at Seplat Energy Plc).
And as Jean-Francois Gauthier, MBA from GHG-Sat put it, “the world is increasingly able to see precisely what the emissions are, where, and from whom” and he went on to say “there is nowhere to hide, and should be no excuses” for lack of action.
The elephant in the room is, however, not the flaring from the leading players (many of whom are already making good progress – at least for their operated assets), but is the flaring associated with “non-operated” assets and those run by National Oil Companies.
To make real and dramatic change we need to work together with our state-backed groups to help them to deliver this important agenda. We also need big-picture, integrative, collaborative and creative “system” thinking, coupled with innovative business models and commercial contracting.
The prize is large and compelling, and the time for standing by is over, as the upside for National Oil Companies is clear – more revenue, more jobs, more gas for domestic consumption, more gas for export, better investment climate, better air quality, oh and lower carbon emissions.
And as consumers become increasingly aware of the supply chain emissions embedded in the products they buy, there is a key role for product certification. As Saima Chaudry Yarrow (Head of LNG at MIQ) said, “we need to rapidly scale the voluntary market [to assure product quality] as we can’t wait for regulation as that will take time, and we don’t have time“.
Key to delivering here is for state-backed entities in particular to: a) fully appreciate the size of the economic upside (using a data-led approach, for example including Capterio’s FlareIntel Pro platform), b) improve the effectiveness of regulation, c) identify the best technologies and d) bring the right resources (of capital and capability) to bear.
FlareIntel Pro enables companies to explore ideas and opportunities on an iPad over a coffee (see Figure 2). As one delegate put it, “your tool gives unrivalled visibility, I used to think it was scary, but now I realise it’s highlighting an incredible and timely opportunity that’s right for companies, governments and the planet“. Too right, we say. As our many case studies from Algeria, Egypt, US and Iraq highlight, gas-to-pipe and gas-to-power projects can be particularly attractive for reducing emissions creating value and accelerating the energy transition (see our case study papers: “celebrating successful flare capture projects with independent data-driven evidence” and “leadership on flaring in Egypt: Recent successes and future opportunities in the lead-up to COP27”).
It was super encouraging to see the keen interest from delegates from a wide range of players on this critical topic. Notable in the conversations were keen interest from operators in several countries in West and North Africa, plus also a growing recognition from investors and financiers.
The good news is that “there is a wall of cash” waiting to be deployed, but as Seb Henbest (Group Head of Climate Transition, HSBC) noted, “capital has choices“, and, by implication, those companies that are more differentiated, and on a Paris-compliant pathway are likely to be more investable and see superior returns.
As Energy Institute’s CEO, Nick Wayth CEng FEI FIMechE said in his closing remarks, “as Mark [Davis] also highlighted, it’s clear that flaring and methane reduction is a clear and urgent global problem“.
We agree. It stands to reason that we must pull together to drive this change. Perhaps we can all learn how to drive change from Bernard Shaw, perhaps, just perhaps, by being a little less “reasonable”?
“The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.”
Watch this space.