Methane gas released by the oil and gas sector has moved high up on the agenda among governments, operators, and other stakeholders in the last few years.
Recognised as a potent air pollutant with high global warming potential – and with the oil and gas sector responsible for a big portion of it – curbing the amount of methane released into the atmosphere presents a huge opportunity in reducing climate risks.
According to figures by the International Energy Agency (IEA), the global energy sector was responsible for nearly 135 million tonnes of methane emissions in 2022.
In Australia alone, methane emissions contribute approximately 26 per cent of aggregate emissions according to the Department of Climate Change, Energy, the Environment and Water.
However, Australia’s official figures were contested last year when the IEA claimed the nation was underreporting its annual greenhouse gas pollution, allegedly failing to record more than 80 per cent of emissions leaking during coal and gas production.
According to estimates by the IEA, in 2022 Australia’s oil and gas production was responsible for about 92 per cent more fugitive methane emissions than official statistics show.
The IEA figures state that Australia’s oil and gas sector emitted 200,000 tonnes emissions in 2022, with oil seeing a 27 per cent increase since 2000, and gas a 66 per cent increase.
However, the IEA has estimated that around 75 per cent of methane emissions from the oil and gas sector could be reduced with existing technology.
In Australia specifically, this figure is 76 per cent, whilst 37 per cent of emissions could be avoided at no net cost.
Equipment and operational techniques can be applied across production chains to reduce methane emissions, and because it is a valuable commodity, this can often be done at no cost or even at a profit.
Leak detection and repair programs are an effective way to reduce fugitive leaks in up and downstream stages. Vapour recovery units can be installed over crude oil and condensate storage tanks to reduce direct venting of methane to the atmosphere.
Furthermore, gas-driven devices that continuously release small amounts of methane can be replaced with low- or zero emitting devices throughout oil and gas systems.
While these technologies are well acknowledged, methane released into the atmosphere in 2022 was only slightly below the record highs seen in 2019.
The Global Methane Pledge, launched at COP26 in November 2021, has more than 155 signatories including the United States, United Kingdom and the European Union – all aiming to reduce global methane emissions across all sectors by at least 30 per cent below 2020 levels by 2030.
At last year’s COP28, it was revealed that over $1 billion in new grant funding for methane action had been mobilised since 2022. On top of this, international financial institutions approved over $3.5 billion in new investments for methane-reducing projects, with the majority provided by the European Investment Bank with over $1.9 billion.
The US was one of the most vocal countries in unveiling new commitments, confirming the country will reduce methane emissions from oil and gas operations by more than 1.5 Gt and achieve a nearly 80 per cent reduction in emissions.
To encourage operators to reach that goal, the U.S. Environmental Protection Agency (EPA) this year proposed a rule that would assess a charge of certain large emitters of waste methane from the oil and gas sector that exceed emissions intensity levels.
The charge was first proposed in 2022, through the Inflation Reduction Act’s (IRA) Methane Emissions Reduction Program, and would apply to emissions that exceeded emissions of more than 25,000 million tonnes of carbon dioxide.
Oil and gas facilities reporting emissions above this level would see charges start at $900 per million tonne of wasteful emissions in 2024, increasing to $1,200 for 2025, and $1,500 for 2026 and beyond.
EPA’s proposed rule also explains how the charge will be implemented, including the calculation of the charge and how exemptions from the charge will be applied.
Over time, it is believed fewer facilities will face the charge as emissions are curtailed and more facilities become eligible for this exemption.
Together with funding secured by President Biden under the Inflation Reduction Act and recently finalised technology standards for the industry issued in December 2023, the proposed charge encourages the early deployment of available technologies and best practices to reduce emissions.
Through the IRA’s Methane Emissions Reduction Program, the US has allocated up to $1.3 billion to improve monitoring and to reduce methane and other greenhouse gas emissions from the oil and gas sector.
“For too long it has been cheaper for oil and gas operators to waste methane rather than make the necessary upgrades to prevent leaks and flaring,” said Rep. Frank Pallone, Jr., Ranking Member of the House Energy and Commerce Committee.
“The Methane Emissions Reduction Program and the proposed Waste Emissions Charge will ensure consumers no longer pay for wasted energy or the harm its emissions can cause.”
Environmental Defense Fund President Fred Krupp said EPA’s proposal for a fee on oil and gas methane pollution implements the clean air protections for Americans as per the IRA.
“It’s common sense to hold oil and gas companies accountable for this pollution. Proven solutions to cut oil and gas methane and to avoid the fee are being used by leading companies in states across the country.”