The article below was carried in Interfax Natural Gas Daily on 21 November 2018. Interfax runs a gas analytics service with daily, weekly and monthly analysis of the global gas and LNG market.
By Peter Stewart, Interfax chief Energy Analyst and Managing Director of Interfax Europe Ltd
The International Energy Agency (IEA) said this week that oil and gas companies should be doing more to cut emissions from their upstream operations, singling out gas flaring as a key area for improvement.
The IEA’s flagship World Energy Outlook (WEO), published on Tuesday said flaring gas was both wasteful and harmful, and that upstream emissions could be reduced further by the electrification of upstream and midstream operations or by building renewables-based systems into the extraction and production process.
The call to action will pile pressure on IOCs and NOCs that are already under intense scrutiny from activist shareholders who want them to decarbonise their value chains. The IEA said 97% of the gas consumed today has lower lifecycle emissions than coal, but that companies need to decarbonise the gas value chain further because of gas’s growing role in the energy mix.
“The aim for the future should be to focus on cost-effective ways to minimise the gap between gas and zero-carbon technologies rather than focus on the gap between coal and gas,” the WEO said.
The IEA estimated that emissions from oil and gas operations accounted for 15% of the energy sector’s greenhouse gas (GHG) emissions.
The industry has been working for years to reduce emissions from oil and gas production, but results have been mixed. Carbon capture and storage/use have been discussed for decades, but the number of sites in operation is limited. Injecting carbon dioxide into wells is common in enhanced oil recovery operations, but it is expensive and by no means universally used.
Billions of cubic metres of gas are still flared annually at oil and gas production sites around the globe, however, and reducing flaring is one of the lowest-cost options for cutting energy-related emissions.
Carbon price
The IEA said a carbon price of $50 per ton of CO2, which is already used by some companies when screening upstream projects, would cut emissions in 2040 by more than 1,000 MMt CO2 equivalent (MMtCO2e) if applied across the oil and gas supply chain. A total reduction of 2,500 MMtCO2e could be achieved if the $50/t carbon price was combined with methane emission reductions that can be achieved at no net cost. The IEA estimated total emissions from oil and gas production amount to 5,200 MMtCO2e per year.
“This saving would be equal to the entire energy sector GHG emissions of India today,” according to the WEO.
Most flaring results from lack of infrastructure rather than the type of oil or gas that is extracted. Small-scale LNG and GTL plants are potential ways to monetise stranded gas or to avoid flaring gas produced in association with oil. But such projects typically make economic sense only if a carbon cost is assumed.
The World Bank’s Global Gas Flaring Reduction Partnership (GGFR) publishes annual estimates of gas flaring based on data from a satellite launched in 2012. The GGFR is a public-private initiative including IOCs and NOCs, national and regional governments, and international institutions. The GGFR has set a goal of zero flaring by 2030.
The 2018 GGFR report, produced with the United States’ National Oceanic and Atmospheric Administration in cooperation with the University of Colorado, showed a nearly 5% decline in gas flaring in 2017 despite a rise in oil and gas production.
“While Russia remains the world’s largest gas flaring country, it also saw the largest decline in flaring last year,” the GGFR said. Venezuela and Mexico also reduced flaring significantly in 2017, while Iran and Libya saw significant increases.

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