Permian Basin methane emissions rising
The worst nightmare of the oil and gas industry has come true: Environmental groups are using satellites to observe and report greenhouse gas emissions from their well pads.
The Environmental Defense Fund, Harvard University, Georgia Tech and the SRON Netherlands Institute for Space Research used a European Space Agency detector to take 200,000 readings across the 61,000-square-mile Permian Basin. The average rate of methane emissions had recently doubled, according to data published in the journal Science Advances.
Methane is a far more damaging greenhouse gas than carbon dioxide. Well operators release it while drilling and completing a well, but it also leaks from malfunctioning equipment. Some environmentalists want to ban new natural gas wells because the industry does not control methane leaks.
EDF’s data paint drillers in a poor light.
“These are the highest emissions ever measured from a major U.S. oil and gas basin. There’s so much methane escaping from Permian oil and gas operations that it nearly triples the 20-year climate impact of burning the gas they’re producing,” co-author Dr. Steven Hamburg, chief scientist at EDF, said while describing data collected between May 2018 and March 2019.
The first eight months of 2020 were just as bad, despite the COVID-19 pandemic, according to Kayrros, a consulting firm that combines satellite technology with other observation tools to develop industry intelligence. The problem is not just in the Permian Basin.
“Based on the number of methane hotspots detected in the oil and gas sector, visible methane emissions around the world have increased by approximately 32 percent (in 2020),” according to a Kayrros analysis. “In Algeria, Russia and Turkmenistan, the increase is even higher, totaling over 40 percent.”
No one seriously thinks we will eliminate the need for oil and natural gas anytime soon. But investors, buyers and consumers are expecting the industry to produce them cleaner. France and Ireland recently rejected liquefied natural gas shipments from Texas due to concerns over Permian Basin emissions.
The supermajor oil companies, including Exxon Mobil, BP and Shell, want stricter limits on methane to help the industry’s reputation. But every company should be worried about their rating on environmental, social and governance issues, something Wall Street calls ESG.
Project Canary, a Denver-based firm, hopes to make a business out of installing sensors on individual well pads and offering real-time monitoring to certify that an operator has adopted best practices. The proprietary Trustwell Certification Process continuously tests for air or water contamination and independently relays the encrypted data to a cloud-based system.
The data are collected by Project Canary, which then certifies the well’s ESG performance for investors or customers, explained CEO Chris Romer.
“This pad-level ESGrating is going to go viral to the energy markets because investors, consumers markets as well as ultimately the commodity buyers, now want transparency on methane intensity, carbon footprint as well as the most rigorous ESG data they can get their hands on,” Romer said.
The company has contracts with 32 firms, including Chevron, Chesapeake Energy, Bayswater, EQT, Kinder Morgan and UP Energy. Houston-based NextDecade recently signed a contract to certify liquefied natural gas exports from its upcoming Rio Grande Valley export terminal.
So far, the industry has completed 16 transactions for natural gas that was certified as responsibly sourced. Project Canary was involved in 14 of them. Customers paid an extra 6 cents a thousand cubic square feet, while the monitoring only cost them 1 cent.
While Project Canary independently collects the data, it belongs to the company being monitored. Executives decide who can see it but cannot adjust the data or collection period. Romer said his company’s success depends on becoming a trusted rating service, such as those used for corporate bonds.
“What this market needs is trusted independent data,” Romer said. “We plan to be the Moody’s or S&P of carbon economics … energy markets need radical transparency on carbon economics because there is a hard cap on how much carbon we can put in the air.”
To help maintain its independence, Romer established Project Canary as a B-corporation, which makes creating a social benefit its primary purpose. Oil and gas companies pay a flat fee for the monitoring services, Project Canary’s only business.
Energy executives are correct when they say the world will need oil and gas for at least another century. But climate scientists are equally valid when they say we must get to net-zero carbon emissions by 2050.
The oil and gas industry will find it harder to attract investors or customers unless they can certify they are producing responsibly. And if they try to cheat, there will always be eyes in the sky ready to catch them.