Tag Archives: carbon dioxide

Greening Natural Gas: How to Record Gas Leaks with Hand-Held Cameras

Energy companies are producing record volumes of natural gas, thanks in part to the U.S. fracking boom. They have ambitious plans to make the cleaner-burning fuel a big part of the global energy mix for decades to come by sending tankers of liquefied gas around the world.But growing public concern over leaks and intentional releases of gas and its primary component, methane, threaten to derail the dominance of gas in the new energy world order.  Methane is far more potent than carbon dioxide in contributing to climate change. That makes it particularly harmful to the environment when it is discharged into the atmosphere.

In the U.S. alone, the methane that leaks or is released from oil and gas operations annually is equivalent to the greenhouse gas emissions from more than 69 million cars, according to a Wall Street Journal analysis using conversion formulas from the Environmental Protection Agency and emissions estimates for 2015 published last year in the journal Science….The Intergovernmental Panel on Climate Change, a United Nations body, says methane is even more potent than the estimates the EPA uses. By its calculation the annual releases would be equal to those of about 94 million cars, or roughly a third of the nation’s registered vehicles.

About 2.3% of the natural gas produced in the U.S. escapes directly into the atmosphere due in part to leaky equipment or intentional discharges, according to the Science study, which analyzed 2015 emissions. (Some discharges are legally permitted.) At that rate, it would have amounted to about $7.6 million worth of gas lost each day last year.  Another roughly $4.5 million in U.S. gas went up in smoke each day in 2018, World Bank data show, as energy companies burned fuel  (a practice known as flaring) they couldn’t move to market or chose not to ship because the cost of doing so would have exceeded the price the gas would fetch in some regions. Many companies drill primarily for oil and treat the gas released in the process as a byproduct.

Leaking and flaring are a global problem. As gas displaces coal for electricity production in the U.S. and other countries its side effects are drawing more attention, not just from environmental activists but investors fretting about how gas will compete over the long term against renewable energy sources such as wind and solar, which are dropping in price.

President Trump’s administration has moved to relax existing federal requirements for monitoring and fixing leaks. Still, from oil giants to the independent drillers powering the shale boom, companies are scrambling to rein in emissions over concerns from their executives, shareholders and environmentalists that gas waste could undermine the argument for gas as the “bridge fuel” to a cleaner future of renewables.

Methane is invisible to the naked eye, so companies detect leaks with infrared cameras and lasers. That can be a tall task—the gas can seep out of countless places, from wells to pipelines to storage facilities.  As a result, energy companies are increasingly supplementing manual inspections with aerial monitoring to survey large swaths of land checkerboarded with oil and gas infrastructure.  In West Texas, BP has begun monthly flights over its wells by a drone equipped with methane-detection equipment.   The company also is looking to cut back on flaring, which many companies do in the Permian Basin of Texas and New Mexico because they lack access to pipelines to move the product to market….BP is investing in a new gas-gathering and compression system that will allow it to send more gas to customers instead of burning it away…

Kairos,  a company, specializes in identifying larger methane releases by flying small planes about 3,000 feet above the ground. …Kairos has received funding from the Oil and Gas Climate Initiative, an industry organization whose members include Exxon Mobil Corp. and Chevron Corp. The companies in the organization have pledged to collectively cut average methane emissions to less than 0.25% of gas sold by 2025.

One reason companies are stepping up monitoring is that environmental activists are watching, using technology to record leaks as they seek to boost public awareness of methane emissions.  Sharon Wilson, an organizer for the advocacy organization Earthworks, visits the Permian almost every month to monitor leaks from oil and gas sites, using a hand-held infrared camera. She submits the footage as evidence in state regulatory complaints against energy companies and often posts it on YouTube…Earthworks has filed more than 100 complaints in Texas and New Mexico since the beginning of 2018. State regulators issued violations or compelled operators to make repairs or install new equipment in fewer than 10% of the instances as of July, according to estimates by the group.

Excerpts from Rebecca Elliott, The Leaks that Threaten the Clean Image of Natural Gas, WSJ,  Aug. 10, 2019

The Carbon Bubble

Regulators around the globe are researching potential risks to financial stability from a failure to contain climate change or a sudden collapse in the value of fossil-fuel assets.  Institutions such as the Bank of England, the Financial Stability Board and the European Systemic Risk Board are examining how banks, insurers and pension funds would cope if policies designed to reduce carbon-dioxide emissions led to a sharp drop in the share price of oil, gas and coal companies.They are looking at new rules to disclose exposures to both stocks and bonds in such companies, conducting stress tests based on different climate scenarios or even requiring additional capital buffers.

The regulators’ concerns rest on scientific assessments that much of the world’s known fossil-fuel reserves would have to stay underground if governments want to limit global warming to 2 degrees Celsius above preindustrial levels. If they aim to contain average temperature increases to 1.5 degrees, as set out in an international climate deal sealed in Paris in December 2015, the so-called carbon budget would shrink even more.

That…cause selloffs of fossil-fuel companies and broader economic problems caused by energy shortages. In 2015, the Group of 20 major economies asked the FSB to scope out potential vulnerabilities in the financial system linked to climate change.

Not everyone agrees with the regulators’ new focus….Spencer Dale, chief economist of BP PLC and a former executive director for financial stability at the Bank of England says only around 2% to 3% of proven fossil-fuel reserves are actually featured on energy majors’ balance sheets, limiting the danger of a sudden drop in the companies’ value due to climate-change policies. “The idea that somehow that we have a carbon bubble—in the sense that the assets that are currently on oil companies’ balance sheets are overpriced, because they won’t be able to use them—I don’t think makes any economic sense,” he says.

Instead, energy companies should provide more information on how climate change and climate-change policies will affect their businesses and allow investors to make their own assessment, says Mr. Dale. BP and Royal Dutch Shell PLC both backed shareholder resolutions to that effect last year.

Excerpts from  Climate Financial Risks Examined, Wall Street Journal, Apr. 1, 2016

Carbon budget

Demand for Carbon Tax

“You can argue that Big Oil is becoming Big Gas,” says Occo Roelofsen of McKinsey, a consulting firm. Others are going in for renewables. Total of France has a majority stake in SunPower, one of the world’s biggest solar-power firms. Eldar Saetre, the boss of Statoil, Norway’s state-run oil company, says that in 15 years there may be more opportunities outside oil and gas than within.

Plenty of oil firms (Exxon among them) are also calling for governments to enact a “carbon tax” on emitters of greenhouse gases. Their critics argue that this is less altruistic than it appears. For one thing, such a tax would hurt the coal industry especially, thereby boosting the oil firms’ gas businesses. And governments, especially in the developing world, where fossil-fuel demand is still surging, may find such a tax politically impossible anyway; the oilmen are calling for it, opponents say, in the knowledge that such countries will never introduce it….

On November 4th New York’s attorney-general, Eric Schneiderman, subpoenaed documents from Exxon to investigate how much it has known since the 1970s about the effects of fossil fuels on the climate. Exxon is reportedly being investigated under the Martin Act, dating back to 1921, which gives prosecutors wide-ranging powers to investigate securities fraud. Exxon says it has long disclosed information about the risks to its business from climate change, and from action to prevent it, in reports to its shareholders. But the firm’s run-in with the New York justice department may be a portent of what is to come.

Another worry for oil executives is pressure from investors spooked by the financial risks of climate change. Policymakers, such as Mark Carney, governor of the Bank of England, talk about the possibility of many oilfields turning into “stranded assets”, or “unburnable carbon”, if governments get serious about climate-change action. Anthony Hobley of Carbon Tracker, a climate-advisory firm, says that if the Paris pledges are taken at all seriously, the oil and gas industry may become “ex-growth”. Oil executives dispute that. But shareholders, if motivated, could force the industry to shrink just by limiting the funds they provide for new oil discoveries.

Curiously, the present situation may provide a foretaste of this—though cyclically, because of falling oil prices, rather than structurally, because of rising temperatures. Faced with a world awash in crude, oil majors are abandoning high-cost reserves in the Arctic, Canada, North Sea and Gulf of Mexico. One oil executive ruefully calls it a “practice run” for the day in the distant future when fears of global warming, or the emergence of cheap, clean alternative technologies, mean that demand for fossil fuels starts to wane.

Excerpt from Oil Companies and Climate Change: Nodding Donkeys, Economist, Nov. 14, 2015, at 61

The Risk of Unburnable Carbon

Several  reports suggest that markets are overlooking the risk of “unburnable carbon”. The share prices of oil, gas and coal companies depend in part on their reserves. The more fossil fuels a firm has underground, the more valuable its shares. But what if some of those reserves can never be dug up and burned?

If governments were determined to implement their climate policies, a lot of that carbon would have to be left in the ground, says Carbon Tracker, a non-profit organisation, and the Grantham Research Institute on Climate Change, part of the London School of Economics. Their analysis starts by estimating the amount of carbon dioxide that could be put into the atmosphere if global temperatures are not to rise by more than 2°C, the most that climate scientists deem prudent. The maximum, says the report, is about 1,000 gigatons (GTCO2) between now and 2050. The report calls this the world’s “carbon budget”.

Existing fossil-fuel reserves already contain far more carbon than that. According to the International Energy Agency (IEA), in its “World Energy Outlook”, total proven international reserves contain 2,860GTCO2—almost three times the carbon budget. The report refers to the excess as “unburnable carbon”.

Most of the reserves are owned by governments or state energy firms; they could be left in the ground by public-policy choice (ie, if governments took the 2°C target seriously). But the reserves of listed oil companies are different. These are assets developed using money raised from investors who expect a return. Proven reserves of listed firms contain 762GTCO2—most of what can prudently be burned before 2050. Listed potential reserves have 1,541GTCO2 embedded in them.

So companies and governments already have far more oil, gas and coal than they need (again, assuming temperatures are not to rise by more than 2°C). Logically, the response to this would be for governments to leave their reserves untouched and for companies to run theirs slowly down, returning more of what they earn to shareholders. Neither of these things is happening. State-owned companies are taking an increasing share of total energy output. And in 2012, says Carbon Tracker, the 200 largest listed oil, gas and coal companies spent five times as much—$674 billion—on developing new reserves as they did returning money to shareholders ($126 billion). ExxonMobil alone plans to spend $37 billion a year on exploration in each of the next three years.

Such behaviour, on the face of it, makes no sense. One possible explanation is that companies are betting that government climate policies will fail; they will be able to burn all their reserves, including new ones, after all. This implies that global temperatures would either soar past the 2°C mark, or be restrained by a technological fix, such as carbon capture and storage, or geo-engineering.Recent events make such a bet seem rational. On April 16th the European Parliament voted against attempts to shore up Europe’s emissions trading system against collapse. The system is the EU’s flagship environmental policy and the world’s largest carbon market.  Putting it at risk suggests that Europeans have lost their will to endure short-term pain for long-term environmental gain. Nor is this the only such sign. Several cash-strapped EU countries are cutting subsidies for renewable energy. And governments around the world have failed to make progress towards a new global climate-change treaty. Betting against tough climate policies seems almost prudent.

The markets are [also] mispricing risk by valuing companies as if all their reserves will be burned. Investors treat reserves as an indicator of future revenues. They therefore require companies to replace reserves depleted by production, even though this runs foul of emission-reduction policies. Fossil-fuel firms live and die by a measure called the reserve replacement ratio, which must remain above 100%. Companies see their shares marked down if the ratio falls, even when they pull the plug on dodgy, expensive projects. This happened to Shell, for example, when it suspended drilling in the Arctic in February….

At the moment neither public policies nor markets reflect the risks of a warmer world.

Energy Firms and Climate Change: Unburnable Fuel, Economist, May 4, 2013, at 68

Top Five Worst Polluters in Gas Flaring

An international coalition led by the World Bank is calling for state-backed and private oil producers to reduce “gas flaring” by an additional 30 percent over the next five years, saying that doing so would be equivalent to taking 60 million cars off of the roads.  Analysts widely characterised the goal as both ambitious and significant, though it follows on an apparent levelling out in flaring reductions in recent years.

Since a major new push began in 2005, the World Bank-led Global Gas Flaring Reduction (GGFR)* partnership estimates that, through 2011, its actions have brought down gas flaring by 20 percent, eliminating around 274 million tonnes of carbon dioxide emissions.  But according to the GGFR – a coalition of 20 major oil companies and 19 countries..both the economic and environmental impacts of gas flaring require far greater reductions.  “A 30 percent cut in five years is a realistic goal,” Rachel Kyte, the World Bank’s vice-president for sustainable development, said…

Oil producers resort to flaring when gas, a by-product of oil, is brought up to the surface but cannot easily be repurposed for consumers. Instead, producers simply burn off the product, the value of which the World Bank, based here in Washington, puts at some 50 billion dollars a year.  The total amount of gas estimated to have been flared last year, about five trillion cubic feet, is said to equal the amount of natural gas used in the United States over a full year.

Environmentalists have long called for the outright banning of the practice, though flaring does in fact release far lower levels of greenhouse gases than simply allowing the gas to evaporate. However, the process does not deal with one notorious pollutant, nitrogen oxide, and still releases significant carbon dioxide, and thus significant greenhouse gas-related worries remain.

Alternative uses for this gas range from producing power, refining it for use in local markets, or even putting it back into the ground. But analysts say the economic benefits for companies in doing so are low.  Nonetheless, the World Bank reports slow but steady success in reductions, particularly since 2005. According to data released Mexico has cut its flaring by two-thirds and Azerbaijan by half in just two years, while Kuwait gotten its flaring down to just one percent of previous levels.  In addition, Qatar and Congo have been singled out for using the gas to make electricity.

Significant improvements have also been seen in many of the world’s worst flaring offenders. “Huge investments” by GGFR partners have reportedly helped Nigeria to reduce its flaring by nearly a quarter through 2011, while Russia, the most significant culprit in this regard, has reduced flaring by around 40 percent, though those figures rose last year.  Still, the World Bank warned that both of these countries, particularly Russia, in addition to Mexico, Iraq and Kazakhstan, need to make significant improvements.

Missing from this list, however, is one of the most significant outliers in the global push against gas flaring: the United States, which has increased its gas flaring by more than three times since 2007, more than any other country.  The U.S. is currently in the midst of a sea-changing boom in natural gas production, thanks almost entirely to new technologies (so-called hydraulic fracturing or “fracking”) that have allowed for the exploitation of previously off-limits gas deposits in shale and other geological formations.

Against the promising country-by-country numbers, total global gas flaring actually increased last year by around two billion cubic metres, which World Bank analysts have put down to output from Russia and, specifically, the U.S. state of North Dakota.  “The small increase underlines the importance for countries and companies to sustain and even accelerate efforts to reduce flaring of gas associated with oil production,” Bent Svensson, manager of the GGFR partnership, said when the 2011 figures became available in July. “It is a warning sign that major gains over the past few years could be lost if oil-producing countries and companies don’t step up their efforts.”

The U.S. is now the fifth-largest flarer, behind Russia, Nigeria, Iran and Iraq. While part of this is due to the multifold increase in production in recent years, it also appears to be due to a lag in implementing the necessary infrastructure.  “Due to insufficient natural gas pipeline capacity and processing facilities … over 35% of North Dakota’s natural gas production … has been flared or otherwise not marketed,” the U.S. government reported in late 2011. “The percentage of flared gas in North Dakota is considerably higher than the national average; in 2009, less than 1% of natural gas produced in the United States was vented or flared.”…But based on new EPA rules, “the U.S. is going to have 100 percent no-flaring by 2015, which will be pretty good in terms of the rest of the world,” Kyle Ash, a Washington-based legislative analyst with Greenpeace, an advocacy group, told IPS.

Excerpts, By Carey L. Biron, U.S. Outlier in New Push to Reduce Gas Flaring,Inter Press Service,Oct. 24, 2012

*The GGFR partners include: Algeria (Sonatrach), Angola (Sonangol), Azerbaijan, Cameroon (SNH), Ecuador (PetroEcuador), Equatorial Guinea, European Bank for Reconstruction and Development (EBRD), France, Gabon, Indonesia, Iraq, Kazakhstan, Khanty-Mansijsysk (Russia), Mexico (SENER), Nigeria, Norway, Qatar, the United States (DOE) and Uzbekistan; BP, Chevron, ConocoPhillips, ENI, ExxonMobil, Marathon Oil, Maersk Oil & Gas, Pemex, Qatar Petroleum, Shell, Statoil, TOTAL; European Union, the World Bank Group; Associated partner: Wärtsilä.