4 Takeaways from the 2018 World Gas Conference

For years, conversations at major oil and gas industry conferences focused on one thing: the shale revolution. Excitement about the surge in economical new supply of unconventionally produced oil and gas was palpable, as panelists spoke of the potential for shale to transform everything from the geopolitics of American energy supply to the price of hydrocarbons. With such an unexpected and seismic change, a supply side story carried the day, with a focus on “below ground” drivers of energy abundance.

But today, the shale revolution is simply the new normal and the conversation has changed. “Above ground” factors like increasing competition from renewables, greenhouse gas emissions, and license to operate will affect demand for natural gas for years. How industry confronts such challenges – both in the United States and internationally – will have a lot to do with industry’s longevity in putting resources to productive use in a changing world demanding cleaner energy

At last week’s World Gas Conference in Washington, DC, difficult questions swirled about whether industry has done enough to earn societal trust that natural gas has a constructive role to play in the transition to a low carbon economy. The biggest buzz of all surrounded one key issue: methane emissions, a core strategic challenge for the oil and gas industry.

I remember from experience that methane began as a niche issue years ago, mentioned by engineering and science teams, not CEOs. World Gas Conference 2018 left no doubt that those days are over, and that tackling methane must become part of business as usual. Here are four key takeaways. Read more

What the heck is an environmental group doing at the World Gas Conference?

The simple answer is this. Environmental Defense Fund (EDF) approaches challenges pragmatically. If we want to rid the planet of harmful climate pollution, our efforts must include working with the industries that can make the biggest difference.

That means I spend a lot of my time working with leaders from the oil and gas industry. While we don’t always agree, we forge solutions wherever we can.

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As ESG goes mainstream, methane disclosure divide looms large on investor agenda

The demand for corporate transparency is here to stay. Just last year, 390 investors representing more than $22 trillion assets signed a letter in support of the Task Force on Climate-Related Financial Disclosures, advocating for a unified set of recommendations for corporate climate disclosure. So as financial markets increasingly recognize Environmental, Social, and Governance (ESG) risks, and increasingly embrace ESG strategies, oil and gas companies failing to report on environmental risks, like methane emissions, will be at a disadvantage.

Yet despite the reputational and financial risks posed by methane emissions in the oil and gas sector, over 40 percent of oil and gas companies analyzed in a new EDF report fail to report even basic information on methane management. The report finds that the quality and quantity of methane risk management reporting has increased amongst nearly 60 percent of companies analyzed. But the overall improvement has not been enough.

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Five things to watch as industry tackles methane in 2018

  1. Target setting

This year, 10 leading companies through the Oil and Gas Climate Initiative supported the ambition of achieving “near zero” methane emissions, and committed to set quantitative methane targets in 2018. This was an important and welcome moment as CEOs upped their methane pledge. 2018 will be a key year for follow through in establishing and announcing those targets. We will look for targets that are ambitious, innovation-forcing, and linked to credible plans for verification. We will also look that this action addresses emissions from both oil and gas production, as the International Energy Agency’s data shows that more methane emissions comes from oil production than from gas production.

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Methane management is risk management

When I worked on the trading floor at Goldman Sachs, one of the major services we provided our corporate clients was risk management. Sitting on the commodity desk, we bought and sold financial products that allowed the world’s biggest consumers and producers to manage their exposure to the often fluctuating price of natural resources like aluminum, crude oil, and natural gas. Companies take action to manage this price risk in order to provide long-term stability for the company and its investors.

Now as a member of the EDF+Business team, I focus on a different kind of risk: climate risk. And just like financial risk, it needs to be managed for the long-term benefit of all stakeholders involved.

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Regulation as a Platform for Innovation

IMG_0187To get anything accomplished, you can’t let the perfect be the enemy of the good. One unsung story buried in last week’s release of EPA’s new source methane rules may make good options even better – driving innovation and offering industry more options to meet the methane challenge.

The new rules target a pervasive problem: methane – the primary component of natural gas – leaking throughout the oil and gas value chain. Methane emissions represent a waste of saleable resources, a reputational risk, and a contributor to both poor local air quality and climate change.

Under the EPA’s framework, oil and gas operators must take steps to minimize emissions from new and modified sources – from finding and fixing leaks to swapping out equipment to reduce methane vented from pneumatic controllers and pumps. Companies in Colorado working to comply with the state’s similar rule have reported that putting similar measures in place is cost-effective, even generating positive returns from selling the captured gas.

But what should an agency do when the solutions available now are reasonable but not perfect? Existing strategies don’t monitor all the time – only a few days a year. So leaks and malfunctions can be missed, or leak for months before they are fixed.

MDC-devices-in-fieldNew technologies – emerging from research labs, startups and mature companies in adjacent sectors – can help spot leaks at lower cost, including through continuous monitoring. EDF’s Methane Detectors Challenge will launch pilots of sensitive, rugged, low-cost continuous methane monitors with oil and gas operators. Due to collaborative partnerships, these innovative technologies are advancing rapidly.

In a regulated industry like oil and gas, adaptability as technology progresses is key to ensuring operators can use more effective and lower-cost solutions as they become available. That insight led many innovators, forward-thinking oil and gas operators and EDF to call on EPA to include a pathway to innovation in the final rule. Read more

Three Ways Methane Standards Can Help the Oil and Gas Sector Rebuild

A massive wave of market and societal forces is changing the oil and gas industry. Low commodity prices are driving out weaker players with excessive debt, and forcing those that remain to become leaner and more efficient. As climate change effects worsen and countries move to fulfill their commitments from the Paris climate agreement, public scrutiny of oil and natural gas and their impacts only intensifies.

The question is not will industry change to meet these challenges — it’s how. It’s about what opportunities can propel industry to come back stronger out of the depths of the commodity slide, as a leaner, cleaner industry standing on firm ground that it can play a meaningful role as societies work to transition to lower-carbon economies.

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While natural gas remains a fact of life, and switching from coal to natural gas has helped reduce greenhouse gas emissions, scientific research has demonstrated that potent methane emissions from the oil and gas system are undermining that climate benefit. The latest U.S. inventory shows over 9 million metric tons of oil and gas methane emissions, packing the same climate impact over a 20 year timeframe as over 200 coal-fired power plants. That’s a lot of methane no matter how you slice it.

Methane standards like the rule announced today by EPA can aid industry, for three reasons: Read more