What to watch for as methane targets become the new normal

Last October, the 10 CEOs of major oil and gas producers, including BP, China National Petroleum and Saudi Aramco, announced an aspiration to reach near zero methane emissions from their companies’ natural gas value chains. They pledged, as part of their participation in the Oil & Gas Climate Initiative (OGCI), to work together on a target that would deliver on this future by the time they reconvened for their next annual event.

Because that anniversary is right around the corner, it’s timely to revisit an analysis EDF released this year – with support from several leading investors and industry experts –that lends key criteria for companies to craft robust methane targets, and for stakeholders to evaluate them.

The guidance is useful for gauging the soon-to-be-released OGCI target, in addition to the growing number of methane targets from individual companies like Shell, BP, ExxonMobil, and ENI. Voluntary targets by leaders have merit, but are in no way a substitute for policy and regulations that help all of industry improve. Rather, strong targets can show what is possible and spur advancements in technology and practice.

So, how does EDF assess the rigor of company methane targets?

Here are the three questions that we, and other stakeholders, should ask:

1. Is the target specific and stringent?

Some companies are making general pledges to reduce methane emissions. To turn those pledges into meaningful action, companies must have specific, time-bound, and measurable targets. Specificity provides a clear marker for success, and a near-term deadline creates an important sense of urgency.

In EDF’s analysis, we point out that targets oriented on absolute numbers guarantee environmental outcomes in a way that intensity-based targets that fluctuate with production levels do not. IEA’s analysis concludes that 75 percent of industry’s methane emissions are technically and economically feasible to reduce.

Producers that opt for intensity targets instead of absolute targets should shoot for a leak rate of 0.20 percent or lower (total methane emissions from all oil and gas production divided by total natural gas production).

2. Which emissions and which assets are included?

Efforts to target methane must address two key scope issues: (1) whether methane from oil production is covered, and (2) how methane will be controlled from assets companies have ownership of but do not operate.

Methane emissions from oil must be targeted because these emissions are a large share of the problem. Indeed, IEA estimates that more than half of upstream methane emissions come from oil production. For natural gas to live up to its cleaner fossil fuel claims, all of industry’s emissions must be minimized, whether from a gas field or an oil field.

With technology advances like satellite monitoring, energy companies also have the reputational incentive to help reduce emissions from facilities they invest in and own, even if they are not the day-to-day operator. This is important, especially for OGCI companies. In 2017, 27 percent of global oil and gas production came from joint ventures with an OGCI partner. Addressing both operated and non-operated assets may take more time and require enhanced collaboration and coordination across business partners, but driving methane management through joint ventures is a key part of achieving large-scale impact and risk mitigation.

3. Is the target based on good and transparent data?

For external stakeholders and policymakers to have confidence in the effectiveness of industry’s methane efforts, the pledges OGCI companies or individual operators make – and the progress made toward them – must be transparent. The OGCI group level goal should be disaggregated at the company level to show that numbers add up.

And because reporting is only as good as the data that goes into it, the underlying quality of the data and methods for calculating emissions will be paramount. Multiple studies show that emission factors tend to underestimate emissions because they do not capture certain large leaks, like those from abnormal process conditions. OGCI companies and others setting targets may use emission factors in year one, but should increasingly shift to direct methane measurements to tie target reporting to what is really happening in the field.

Fortunately, efforts like OGCI’s Climate Investment fund and the Stanford/EDF Mobile Monitoring Challenge are advancing new technologies and approaches to detect and quantify emissions – key tools both for achieving OGCI and individual company targets and for verifying that progress with good data.

OGCI’s pending announcement comes at a crucial time. Reducing oil and gas methane emissions isn’t just the fastest and most immediate opportunity we have to reduce the rate of warming now, it’s an early indication of whether industry leaders are adjusting to a world that increasingly demands more responsibly produced and sourced energy.

The pending OGCI target matters, and not just because the member companies represent roughly 20 percent of global oil and gas production. It matters because these companies are presenting themselves as leaders that recognize the risk that unchecked methane emissions pose to natural gas’s role in a decarbonizing world. If any collection of oil and gas executives should set an ambitious target, it’s OGCI.

We’ll be watching and asking these questions. We hope you do, too.