July 18, 2018: Energy Industry Motivated to Cut Greenhouse Gas Emissions
Last week, John Williams, Apache Corp., drafted this opinion piece that ran in the Houston Chronicle. In case you missed it, here are the highlights.
The US consumes 100 Trillion BTU of energy every year which is 20 percent of global consumption. Natural Gas is approximately 30 percent of that consumption and because of the huge amount of reserves worldwide that percentage will remain the same or perhaps even grow because it is a clean fuel source.
Natural gas, of course, has become the fuel of choice — a fuel that markets itself as far less pollutive than coal. But methane is its main component, which is 84 times more potent than CO2, although its lifespan is 20 years compared to 100. Indeed, methane makes up about 25% of the global warming today.
That’s why the Principles for Responsible Investment (PRI) is rounding up the support of the investment community to get those energy companies to measure their methane releases, report them to shareholders, and work to capture them by using “off-the-shelf” technologies. The methane could then be resold and the oil and gas companies would have a positive pay-back. Altogether, PRI says its initiative represents 35 investors who control $3.8 trillion.
To that point, ONE Future had ICF perform a study, “Economic Analysis of Methane Emission Reduction Potential from Natural Gas Systems”. The results showed that the marginal abatement cost or MAC of methane emissions reductions is $3.35/mcf (end of Executive Summary, page 5).
The investment in those technologies will be needed. BP said in its global energy outlook that between 2015 and 2035 oil, natural gas and coal will each comprise about 27 percent of the energy mix. Indeed, major oil companies — BP, Royal Dutch Shell and Chevron Corp. — are on board with cutting CO2 emissions because all cite their efforts to drill for natural gas, which is in high demand not just for electric generation but also for chemical and manufacturing processes.
EDF, in fact, says that oil and gas is concerned about its brand and has thus formed the Oil and Gas Climate Initiative — a $1 billion initiative to accelerate low-carbon technologies. The main focus, it says, is advanced carbon capture and storage as well as to limit and capture methane releases. The oil companies taking part are BG Group, BP, Eni, Pemex, Reliance Industries, Repsol, Saudi Aramco, Shell, Statoil and Total.
The investment community is doing its part. And so is the judicial system, which earlier this month said that Donald Trump’s Environmental Protection Agency could not suspend methane rules adopted by the Obama administration. The U.S. Court of Appeals for the District of Columbia ruled that the Trump administration must immediately begin enforcing the regulation.
The methane rule, enacted in May 2016, had been part of the Obama administration’s overall effort to cut the level of methane emissions by 40-45 percent by the year 2025, from 2012 levels. If escaping natural gas could be captured and resold, industry could increase its revenues by as much as $188 million a year, it added.
Trump’s EPA had been more sympathetic to the oil and gas producers, who said that the rule is too onerous and that it duplicates those already monitored by the states.
Furthermore, the American Petroleum Institute pointed to a study by EPA that said methane emissions have been falling, making the trade group question why new rules have even been necessary. The report released in March shows that methane emissions from all petroleum systems decreased by 28 percent since 1990. EPA attributed this improvement to decreases in emissions from associated gas venting and flaring.
Corporate governance and environmental management go hand-in-hand. Companies are thus under greater pressure to disclose their non-financial metrics, which in this case is not just CO2 but also methane releases. It’s ultimately about bettering both the environment and the bottom line — and something that will drive a competitive advantage while building brand loyalty.