IEA (2023), Global Methane Tracker 2023, IEA, Paris https://www.iea.org/reports/global-methane-tracker-2023, Licence: CC BY 4.0
Strategies to reduce emissions from oil and gas operations
Oil and gas methane emissions represent one of the best near-term opportunities for climate action because the pathways for reducing them are well-known and cost-effective. 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 only about 15 USD/tCO2-eq.
Proven technologies and policies can greatly reduce emissions
The methane emissions intensity of oil and gas operations varies greatly across countries, with the best performing countries having an emissions intensity over 100 times lower than the worst performers. High emissions intensities from oil and gas operations are not inevitable; they are an “above-ground issue” that can be addressed cost-effectively through a well-established combination of high operational standards, firm policy action and technology deployment.
Oil and gas methane emissions and methane intensity of production in selected countries, 2022
OpenA small number of sites and pieces of equipment are often responsible for a disproportionately large amount of methane emissions. For example, a recent measurement campaign in the United States found that low-producing marginal wells are responsible for half the well pad emissions in the Permian Basin and that more than 75% of these wells are owned by major corporations.
Around 40% of oil and gas emissions could be reduced at no net cost using existing technologies
The technologies and measures to prevent methane emissions from oil and gas operations are well known and have been deployed in multiple locations around the world. Key examples include leak detection and repair campaigns, installing emissions control devices, and replacing components that emit methane in their normal operations. Many measures can also save money because the outlays required to deploy them are less than the market value of the methane that is captured and can be sold.
The cost effectiveness of abatement measures varies by country, depending on the prevailing emissions sources, capital and labour costs, and natural gas prices. Based on average natural gas prices seen from 2017 to 2021, around half of the options to reduce emissions from oil and gas operations worldwide could be implemented at no net cost; implementing these would cut oil and gas methane emissions by around 40%. Based on the record gas prices seen around the world in 2022, around 80% of the options to reduce emissions from oil and gas operations worldwide could be implemented at no net cost; implementing these would cut oil and gas methane emissions by more than 60%.
Regardless of the natural gas price, tackling methane emissions remains one of the cheapest and most effective ways to limit near-term global warming. Around USD 100 billion in investment is required to 2030 to deploy all methane abatement measures in the oil and gas sector. This is less than 3% of the net income received by the oil and gas industry in 2022. 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 only about 15 USD/tCO2-eq.
Marginal abatement cost curve for oil and gas methane emissions by mitigation measure, 2022
OpenUniversal adoption of tried-and-tested policies would cut worldwide emissions from oil and gas operations in half
The IEA’s Curtailing Methane Emissions from Fossil Fuel Operations report outlines a range of well-established policy and regulatory tools that exist to help countries create the right incentives. These policies have been tried and tested in a number of different countries and situations and include requirements for leak detection and repair, equipment mandates, and measures designed to limit non-emergency flaring and venting. If these measures were to be adopted worldwide, we estimate that they would cut methane emissions from oil and gas operations by half.
Marginal abatement cost curve for oil and gas-related methane emissions by policy option, 2022
OpenWhile several countries have adopted elements of the tried and tested policies, no country has adopted all of them. Even early movers on methane regulation need to redouble their efforts to reach their full abatement potential. In parallel, these countries can support others by providing technical assistance and support, especially for countries that may be considering methane emissions for the first time.
Additional policies are available for countries that seek even greater emissions reductions. These include emissions pricing, financing instruments, and performance standards that would need to be supported by robust measurement-based monitoring regimes.
The IEA’s Policies Database brings together more than 450 examples of policies that can directly or indirectly support methane abatement. Building on these examples, the IEA has prepared a detailed “how-to" guide for policy makers looking to develop new methane policies and regulations. This Regulatory Roadmap and Toolkit collects the experience of regulators around the world and can serve as a blueprint to support further technical assistance and capacity building efforts.
Voluntary initiatives can play a key role in ensuring timely reductions
Along with actions by governments, the industry and investment communities have important roles to play in driving rapid cuts and furthering abatement efforts. Companies can often act more quickly than governments, particularly where regulatory capacity is limited; companies are also closer to the problem at hand and have the required technical capabilities to manage methane emissions. Investors and financiers can play an important role by sending clear signals that good performers will be rewarded, as well as working with companies to set targets and hold them to account.
A number of oil and gas companies have already set targets to limit emissions, or reduce their emissions intensity. There are many voluntary, industry-led initiatives including the Methane Guiding Principles, the Oil and Gas Climate Initiative, the Oil and Gas Methane Partnership 2.0 and the China Oil and Gas Methane Alliance. Through these initiatives, companies have committed to reduce their emissions intensity over time, to advocate for sound methane policy and regulation and to be more transparent about their emissions. While these initiatives are a promising step, they have so far not delivered demonstrable reductions on a wide scale.
To drive reductions at the necessary pace and scale, companies should adopt a zero-tolerance approach to methane leaks from their facilities. In 2022, the Oil and Gas Climate Initiative launched the Aiming for Zero Methane Emissions Initiative, a call for the industry to treat methane emissions as seriously as it already treats safety. This includes aiming to reach near zero methane emissions from operated oil and gas assets by 2030, encouraging partners to do the same, putting in place all reasonable means to avoid methane venting and flaring, and repairing detected leaks. In a similar effort towards net-zero goals, the offshore industry in the United Kingdom is working on a Methane Action Plan to reduce emissions by 50% from 2018 levels and end routine flaring by 2030.
Accelerating innovation in methane monitoring and abatement
Government commitments on methane are inspiring new ideas among innovators and entrepreneurs who anticipate more stringent regulations and a payment premium for oil and gas associated with lower emissions. Early-stage venture capital funding for start-ups developing businesses in this area has grown to around USD 20 million per year in the past five years, double the level during the preceding five years. This funding has mostly gone to new techniques for sensing methane, followed by products designed to use methane to supply onsite energy. As a sign of investor confidence, the level of later stage equity funding for companies scaling up their operations dramatically increased in 2021 and 2022. For example, Crusoe Energy Systems raised USD 450 million since 2021 and Project Canary raised USD 100 million, while GHGSat and Kayrros raised USD 45 million each.
Satellite-detected methane leaks from human activity, 2022
Kayrros (2023), The Methane Watch.
New technologies will make it easier to monitor and reduce methane emissions. Continuous monitoring devices are now available to scan facilities at all times, allowing operators to rapidly detect and respond to leaks. Flares are also now monitored every day on a near real-time basis, helping companies to identify bottlenecks and opportunities in operated and non-operated assets. Mobile mini-LNG production equipment can reduce the need for flaring and venting during well-testing and other short-term operations. Automated air/fuel ratio controls can ensure compressors and engines operate at optimal levels, reducing the amount of methane that escapes from combustion processes.