ENVIRONMENTAL DEFENSE FUND
EDF BUSINESS
The role of digital technologies in minimizing global oil and gas methane emissions
Executive Summary
Oil and gas production comes with associated emissions of methane, a potent greenhouse gas. Methane emissions in the atmosphere account for about 25 percent of global warming today.1 Beyond the environmental impact, the economic loss is significant. Every year, an estimated $30 billion of methane is released into the atmosphere.
Methane emissions occur throughout the value chain, from production to distribution. However, more than half of emissions occur upstream during production. Given the scale and complexity of oil and gas infrastructure, finding and fixing methane leaks can be resource-intensive. While conventional solutions exist to address this challenge, digital technologies have the potential to expand the scope and accelerate the scale of methane emissions reduction.
Digital will be key to the industry’s transformation efforts in light of ongoing supply and demand disruptions
The oil and gas industry is no stranger to technology. Yet, despite facing a confluence of disruptive supply and demand-side forces, the industry has lagged others such as consumer products and industrials in scaling digital technologies. Digital solutions are critical to the industry’s transformation and holds sizeable value potential. According to World Economic Forum research conducted in collaboration with Accenture, it is estimated that US$1.6 trillion of economic, environmental and societal value can be unlocked through digital transformation. Going forward, accelerated and holistic adoption of digital solutions will change the way the industry operates and makes decisions.
…and so with methane emissions, digital can play a pivotal role in expanding scale and scope of impact
Digital enables oil and gas companies to run advanced diagnostics that enable better prescriptions and faster decisions. In the area of methane emissions, these abilities can underpin a system that can detect – either ahead of time or just in time – a potential or actual leak event, present remedies, and enable rapid action. The industry is in the early stages of this shift.
As they move forward, companies are encountering the same challenges with scaling digital (and conventional) methane management technologies as they are with adopting a system-wide approach to digital across the value chain. This presents an opportunity for industry players to integrate emissions management into their broader digital transformation. It is particularly important that they do so now, while they are deploying or scaling their broader
digital initiatives—not after their digital agendas are set. For instance, while the industry uses operational data, advanced analytics and artificial intelligence to build their predictive maintenance capabilities, proxy parameters already captured can be used to identify methane leaks.
A multi-stakeholder, ecosystem-based approach can accelerate this journey and maximize potential impact
Realizing the shift toward a digital methane future requires an enabling ecosystem – one that can only be shaped through the collaborative efforts of diverse stakeholders. Such an industry ecosystem can play a key role in identifying, piloting and adopting innovative business models. For example, methane management-as-a-service could help promote shared ownership of investments and rewards, thereby fostering action from smaller operators. Similarly, stakeholders such as investors and regulators can help build a shared commitment toward the digital methane agenda, thereby galvanizing accelerated action at scale.
The industry is waking up to the challenge that methane emissions pose. It must now translate commitments, such as those made through the Oil and Gas Climate Initiative (OGCI) and Methane Guiding Principles, into actions. An infrastructure comprising conventional and digital elements makes that possible.
This paper explores how the journey to the digital methane future can be shaped and accelerated and will address pertinent questions such as: How can digital play a role in preventing methane emissions? Can digital help make the opportunities available today financially viable for businesses? What are the potential opportunities to expand the scope of existing digital solutions to cover methane reduction?
The Big Picture
Natural gas is considered one of the lower emitting fossil fuels in the global energy mix. However, when directly emitted into the atmosphere, methane poses a grave challenge, accounting for about 25 percent of global warming today.
Natural gas is considered one of the cleanest fossil fuel-based source of energy and is poised to be a fuel of the future. It is estimated that CO2 emissions (per unit of energy produced) from natural gas are approximately 40 percent lower than those from coal and about 20 percent lower than those from oil.
However, over a few decades, methane can warm the planet 86 times more than CO2. The environmental consequences of methane emissions are a concern for stakeholders. However, there are financial and health implications as well.
Environment: It is estimated that 2.3 percent of gas produced is lost to the atmosphere, with some operations wasting much more. Each ton of methane emissions emitted from oil and gas operations increases the climate impact of the fuels and makes a 2-degree future more difficult to achieve.
Health and safety: At small concentrations, methane alone has no known impact on human health. However, other harmful materials can be released along with these emissions. In a 2015 study conducted by Sage Environmental for California Air Resources Board (CARB), most of the leaked methane samples were found to contain carcinogens and development toxins.
Financial: Many companies are unaware of their fugitive methane emissions and, therefore, the associated financial impact. According to research, reducing emissions could save upstream oil and gas companies US$34 billion globally. This is greater than the GDP of more than 90 countries. Furthermore, institutional investors have expressed concern about methane emissions weakening the credibility of natural gas and contributing to costly license to operate risks.
Given the broad implications of methane leaks, it is imperative to develop a holistic view of the challenge across the oil and gas value chain.
Download full version (PDF): Fueling a Digital Methane Future
About the Environmental Defense Fund (EDF)
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Tags: EDF, Environmental Defense Fund, Methane, Methane Gas, Oil and Gas Industry
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