Speaker 1: This is Dana Perkins and you're listening to Switched on
Speaker 1: the BNAF podcast, and today we talk about methane leaks
Speaker 1: and how to find them. Methane is a potent greenhouse
Speaker 1: gas with a shorter half life than carbon dioxide, but
Speaker 1: with more global warming potential in that shorter life. So
Speaker 1: while methane might be the simplest hydrocarbon with just one
Speaker 1: carbon and four hydrogen atoms, it is a complex problem.
Speaker 1: Today we welcome Maria Olivia Porce from our oil team.
Speaker 1: While there's plenty of methane coming from agriculture, she's actually
Speaker 1: going to share how methane is being monitored in the
Speaker 1: oil and gas industry. Satellites have changed the way we
Speaker 1: detect leaks, illuminating just how flawed previous monitoring and reporting
Speaker 1: were in addition to the leaks themselves. But what are
Speaker 1: oil companies doing with this better information? B and EF
Speaker 1: subscribers will be able to access several research notes on methane,
Speaker 1: and I recommend taking a look at the oil and
Speaker 1: gas methane monitor super emitters in the US as well
Speaker 1: as oil and a methane fixed more likely with growing
Speaker 1: un group and the methane bill facing US oil and gas.
Speaker 1: These can be found at BNEF dot com and at
Speaker 1: BNF go on the Bloomberg terminal. If you like this show,
Speaker 1: give us a review or subscribe, and it will help
Speaker 1: make us more discoverable by other listeners like you. Right now,
Speaker 1: let's get to talking about methane. Maria, thank you very
Speaker 1: much for joining today.
Speaker 2: Thank you for having me.
Speaker 1: So we're going to spend this entire show talking about methane,
Speaker 1: which we often talk about in carbon equivalence. But let's
Speaker 1: start by just talking about methane as methane, not as
Speaker 1: an equivalent to anything. Why for those people who are
Speaker 1: focused on climate change and interested in limiting the effects
Speaker 1: of climate change, whether paras aligned or otherwise, why should
Speaker 1: we care about methane?
Speaker 2: Sure? So, methane is the main constituent of natural gas,
Speaker 2: so that's gas of fossil origin, and it makes up
Speaker 2: about seventy to ninety or even slightly over in ninety
Speaker 2: percent of the gas composition. It is colorless and odorless,
Speaker 2: which means that it's virtually invisible to the naked dye. However,
Speaker 2: methane is a very potent greenhouse gas. So what that
Speaker 2: means is that over a twenty year period, methane traps
Speaker 2: eighty two point five times more heat than carbon dioxide.
Speaker 2: And here I'm referencing the twenty year figure because methane
Speaker 2: has a very short atmospheric lifespan of about twelve years
Speaker 2: before it gets oxidized and converted to carbon dioxide. However,
Speaker 2: methane is the second largest contributor to climate change, so
Speaker 2: it means that if we're able to reduce methane emissions
Speaker 2: in the short term, we will be able to limit
Speaker 2: the global rise in temperatures.
Speaker 1: So when we're talking about methane methane and depending on
Speaker 1: how you pronounce in what part of the world you're from,
Speaker 1: this is a greenhouse gas that is really important that
Speaker 1: we think about intervening on right now. So this zero
Speaker 1: point in the future when we talk about carbon emissions
Speaker 1: being out in twenty fifty, is potentially much more urgent
Speaker 1: when it comes to methane and we're thinking about warming
Speaker 1: and the effects that it could have immediately. So let's
Speaker 1: talk about where it comes from. So I know, first
Speaker 1: of all that it comes from cows, and there's a
Speaker 1: lot of discussion around that part of the agricultural system.
Speaker 1: But where are some of the other places and potentially
Speaker 1: what we're going to talk about a little bit more
Speaker 1: detail on the show today.
Speaker 2: Sure, you're absolutely correct. Agriculture is in fact the largest
Speaker 2: source of methane emissions, so about forty percent, followed by
Speaker 2: oil and gas, and depending on the inventory, oil and
Speaker 2: gas would be between twenty to something like thirty percent. So,
Speaker 2: because it is a natural gas, it is a very
Speaker 2: common product in oil and gas production and operation, so
Speaker 2: there it can leak at various points across the supply
Speaker 2: chain and that's how it ends up in the atmosphere.
Speaker 1: Well, so let's talk about that within the oil and
Speaker 1: gas universe. Some of this must come from extraction and
Speaker 1: then transportation and then actual use. So can you break
Speaker 1: down the different sources within oil and gas where there
Speaker 1: are methane leaks?
Speaker 2: Sure, so the sector where most of these emissions are
Speaker 2: coming from is actually the sectors are the upstream and midstream.
Speaker 2: There isn't that much on the end you side, just
Speaker 2: because it is combusted. So when you combust it it
Speaker 2: turns into CO two. But if we think about upstream
Speaker 2: and midstream, we can break it into three different main sources.
Speaker 2: So we can think about equipment we can think about
Speaker 2: operations and we can think about the economics. So if
Speaker 2: it's to do with equipment, these can include things such
Speaker 2: as faulty equipment, so devices that are not working properly,
Speaker 2: or devices that have been designed to function in a
Speaker 2: way such that they release natural gas when they need
Speaker 2: to carry out and processes, whether it's regulating pressure, temperature,
Speaker 2: And here I'm describing something that's called pneumatic devices, which
Speaker 2: in the US, according to data that company is self
Speaker 2: report to the Environmental Protection Agency or the EPA, they
Speaker 2: represent the largest source of emissions for operations. In some cases,
Speaker 2: they're designed in such a way that they can be
Speaker 2: improved so that you can limit the amount of gas
Speaker 2: that escapes from various processes. And then with economics, so
Speaker 2: it could be because, for instance, the amount of gas
Speaker 2: that is being produced is very small, so that it
Speaker 2: doesn't make economic sense to treat and transport that gas.
Speaker 2: And this would be very common where gas is an
Speaker 2: associated product, in other words, where a well produces primarily
Speaker 2: oil and some gas, So that would be the case
Speaker 2: where the volumes are quite small, or it could be
Speaker 2: that there isn't enough spare capacity in the pipeline, so
Speaker 2: that the operator may not have the option to store
Speaker 2: the gas and reuse it for instances fuel on site,
Speaker 2: and they have to dispose of it.
Speaker 1: So we know where it comes from various sources, actually
Speaker 1: lots of places that it comes from. We know where
Speaker 1: it comes from, and we know why we should care
Speaker 1: about it as a greenhouse gas. When you go to
Speaker 1: analyze something, it always starts with a data set and
Speaker 1: where are you getting the information from that you are
Speaker 1: analyzing when you're looking at current state of play with
Speaker 1: methane leaks, and really the beginning of how we fix
Speaker 1: the problem, how do you find the problem?
Speaker 2: So we think that we should make use of all
Speaker 2: the available data that we have now rather than wait
Speaker 2: for perfect data. And we can start with inventories. So
Speaker 2: this could be whether it's a country level inventory, which
Speaker 2: wouldn't be too granular. We could look at data that
Speaker 2: companies self report to the agencies, like the one that
Speaker 2: I mentioned from the us EPA. But we have been
Speaker 2: quite lucky in the past and we've had a number
Speaker 2: of satellites that are able to observe methane emissions from space,
Speaker 2: so we've been able to interg rate data that is
Speaker 2: now measured rather than being estimated. A problem that we
Speaker 2: have with these inventories is that they tend to underestimate.
Speaker 2: So from studies that have been done again, the figure
Speaker 2: in the US that we've seen is that these methane
Speaker 2: emissions from oil and gas could be under reported by
Speaker 2: sixty percent, which is quite a lot. So that's when
Speaker 2: we turn to measure data in order to understand or
Speaker 2: to fill in these discrepancies.
Speaker 1: Okay, so you've established that we now know that the
Speaker 1: information that's coming to us from the companies that are
Speaker 1: reporting their methane emissions is dramatically underreported. So then we
Speaker 1: turn to this satellite information. Talk to me a little
Speaker 1: bit about the benefit of the satellite data and then
Speaker 1: some of the areas where maybe that satellite data is
Speaker 1: a little bit less reliable and why this is a
Speaker 1: really tricky area to analyze.
Speaker 2: Sure, first of all, let me just briefly explain how
Speaker 2: satellites actually measure methane.
Speaker 1: That'd be great.
Speaker 2: So satellites use. Most of the satellites that are observing
Speaker 2: methane currently, they rely on a principle called backscattering, so
Speaker 2: they use incoming sunlight which is then reflected from the
Speaker 2: Earth's surface, and as it travels through the atmosphere, it
Speaker 2: will be absorbed and re emitted by the gases that
Speaker 2: it encounters, and those gases will leave a distinctive fingerprint
Speaker 2: in the incoming sunlight. That which is the satellite spectrometer.
Speaker 2: So that's simply a device that splits light into different components.
Speaker 2: So the incoming light which is the satellite and is
Speaker 2: being analyzed for the methane wavelengths in other parts is
Speaker 2: looking for the methane signature. What we didn't do because
Speaker 2: that would be the concentration of methane. We didn't need
Speaker 2: to do further processing to turn that into aliqu rates.
Speaker 2: So how many kilograms or tons of methane per hour?
Speaker 2: And you're correct in pointing out satellites do have limitations.
Speaker 2: So although they don't work very well in areas of
Speaker 2: high latitude, also limited by atmospheric conditions where you have
Speaker 2: a very high cloud cover, they obviously can't really see
Speaker 2: very well. And also offshore they tend to although that
Speaker 2: space is changing now and there have been progresses made.
Speaker 2: So satellites do struggle offshore because the sea absorbs most
Speaker 2: of the sunlight so that it cannot reach the satellite spectrometer.
Speaker 2: To overcome these challenges, companies have looked at aligning the
Speaker 2: satellite in such a way that then the sea surface
Speaker 2: essentially acts as a mirror and it can reflect most
Speaker 2: of the sunlight and the satellite can analyze that for
Speaker 2: the methane fingerprint. But the huge benefit of having satellite
Speaker 2: observing the Earth is that it's essentially remote observations. We
Speaker 2: are measuring it rather than relying on imperfect and less
Speaker 2: optimal methods that are calculating methane. And when you're doing that,
Speaker 2: you're adding another layer of t cosparency. It's data that's
Speaker 2: independently measured, so it's getting us closer to the actual
Speaker 2: numbers when it comes to understanding methane emissions. The other
Speaker 2: I'm not sure if I wouldn't necessarily call it a limitation,
Speaker 2: but is something to be aware of. So different satellites
Speaker 2: they would have different resolutions, So what this means is
Speaker 2: that when they're observing the Earth, for instance, they could
Speaker 2: see essentially two distinct emissions event appear as one just
Speaker 2: because they're not able to resolve at a very fine resolution.
Speaker 2: And that becomes important when we're talking about superimeters. For instance,
Speaker 2: but again the space has been fairly exciting. In the
Speaker 2: past year alone, we've had two satellites being launched, so
Speaker 2: that's the Environmental Defense Funds Methane AT and Carbon Mappers
Speaker 2: TANAGER one. So whilst methinks that will be focused on methane,
Speaker 2: the Carbon Mapper satellite will be looking at methane as
Speaker 2: well as carbon dioxide blooms.
Speaker 1: So to what a stent are the mirrors of methane?
Speaker 1: You're also utilizing this data or is it largely being
Speaker 1: embraced by third parties like ourselves and by like the
Speaker 1: Environmental Defense Fund.
Speaker 2: Yes, so, apart from the academics that are using this
Speaker 2: data to better understand where methane emissions are coming from,
Speaker 2: there are third party organizations. So one of them would
Speaker 2: be the International Methane Emissions Observatory or IMEO, which is
Speaker 2: a United Nations initiative. And what they do they collect
Speaker 2: data from a number of satellites and they made these
Speaker 2: observations publicly available. Did you disaggregate the data by sector only?
Speaker 2: So oil and gas, coal and waste, But there isn't
Speaker 2: any further granularity beyond that.
Speaker 1: So for anyone who wants to look at this data,
Speaker 1: set though, the IMEO has that available right now, I
Speaker 1: can Google search it and there it is. I can
Speaker 1: see bisector where this methane is coming from globally.
Speaker 2: Yeah, that's correct. You'll be able to see the plumes
Speaker 2: on a map, and you'll be able to know what
Speaker 2: rate they're associated with, so how much methane they leaked,
Speaker 2: and you'll be able to see the sector.
Speaker 1: But the data that you looked at was much more granular.
Speaker 1: So what were some of the key takeaways from your
Speaker 1: analysis when you did look a little bit deeper into
Speaker 1: this data.
Speaker 2: You're right, So we actually used the Imeo data, but
Speaker 2: because of the issue of the sector level granularity that
Speaker 2: I mentioned, we thought that our research could fill in
Speaker 2: this gap for more transparency, and we really wanted to
Speaker 2: add more context around you know, where these methane plumes
Speaker 2: are coming from, so what are the emitting facilities? Who
Speaker 2: are their operators? So we analyzed about three hundred methane
Speaker 2: plumes in the US that occurred between January last year
Speaker 2: and Apro this year. But yeah, all the data came
Speaker 2: from from Imeo. What we did differently was that we
Speaker 2: looked for the nearest oil and facility to a plum
Speaker 2: and we try to map those so that we were
Speaker 2: then able to understand again facilities and operators, how difficult
Speaker 2: is it.
Speaker 1: To reduce the amount of mething being emitted.
Speaker 2: So for oil and gas, it's actually the sector where
Speaker 2: you have the highest potential for the fastest and relatively
Speaker 2: inexpensive large methink reductions, because as we were talking earlier,
Speaker 2: is really about fixing leaks. So it could be optimizing processes,
Speaker 2: or it could be replacing equipment, but generally these reductions
Speaker 2: they do come at a relatively inexpensive cost.
Speaker 1: Presumably one of the challenges with addressing these leaks is
Speaker 1: finding them. But as this satellite data is becoming much
Speaker 1: more prevalent, you'll be able to find them even better.
Speaker 1: And some of these companies are actually able to then
Speaker 1: locate leaks and sometimes very remote areas. So this is
Speaker 1: certainly a tool that were a lot of people are
Speaker 1: embracing at moment, whether on the third party side like
Speaker 1: we are, or within these oil and gas companies themselves
Speaker 1: now the IOSes, so the international oil companies, many of
Speaker 1: them are reporting and including their environmental, social and governance
Speaker 1: data and making it available because they are publicly listed
Speaker 1: in their investors but the national oil companies do not
Speaker 1: have this reporting imperative our national oil companies also looking
Speaker 1: at this data. Are we really then still talking about
Speaker 1: the listed companies when it comes down to targeting this
Speaker 1: source of emissions.
Speaker 2: So there has been a lot of traction among different operators,
Speaker 2: whether IOSS or national when it comes to methin I
Speaker 2: just wanted to flag that some have for instance, and
Speaker 2: I'm referring to the ioces here, some have started fairly
Speaker 2: early and their mitigation METHA mitigation programs have involved things
Speaker 2: such as working with third party detection technologies, whether it's
Speaker 2: to develop drones to sensor, So there has been a
Speaker 2: lot that has happened in that field. When it comes
Speaker 2: to THENCS in all fairness, iconing one that has done
Speaker 2: to the same level that an IOC has done.
Speaker 1: So there's the pressure coming from investors, which impacts some companies.
Speaker 1: But then there's policy, and there's international policy, and one
Speaker 1: of the places where countries come together and talk about
Speaker 1: climate is at the COP meetings. So last year COP
Speaker 1: twenty eight in Dubai, methane featured quite heavily and this
Speaker 1: certainly could be a place where targets and methane emission
Speaker 1: reductions would really come from at a national oil company level.
Speaker 1: Can you talk a bit about what those discussions were
Speaker 1: last year at cop when in regard to methane specifically.
Speaker 2: Sure you are correct, methane was really in the spotlight
Speaker 2: at last year's COP and just to recap a couple
Speaker 2: of the things that were agreed and happened there when
Speaker 2: it comes to methane. So we had the Global Methane Pledge,
Speaker 2: which increased the number of countries that are now adhering
Speaker 2: to that. So the last time I checked that was
Speaker 2: one hundred and fifty eight and the Global Methane Pledge
Speaker 2: they are aiming for reducing methane across all emitting sectors
Speaker 2: by thirty percent by twenty thirty and the countries that
Speaker 2: signed the pledge they agreed to have more transparent policies
Speaker 2: and to pursue methane reduction efforts. We also had the
Speaker 2: launch of the Oil and Gas Decarbonization Charter, which is
Speaker 2: a company led initiative, and we also heard about progress
Speaker 2: in terms of financing, so the Methane Finance Sprint that
Speaker 2: was an initiative that was launched by the US government
Speaker 2: and then invited other governments as well as financial institutions
Speaker 2: and the private sector to contribute in we've heard that,
Speaker 2: but by COP twenty they've raised one billion in in funding.
Speaker 1: Specifically to address methane emissions and missions more on the
Speaker 1: oil and gas side and targeting these leaks or across
Speaker 1: everything including agriculture.
Speaker 2: This was across all sectors. You are correct, But one
Speaker 2: thing I would also like to highlight. Despite this figure,
Speaker 2: which to me seems large, We've seen analysis done by
Speaker 2: the Climate Policy Initiative, and their analysis has shown that
Speaker 2: in order to reach fossil fuel methane abatement, we need
Speaker 2: to invest about eleven point two billion a year.
Speaker 1: So this reminds me a bit of Austin Powers, where
Speaker 1: even the originally says one million dollars and everyone kind
Speaker 1: of chuckles because it's not quite enough money. So just
Speaker 1: now you said one billion dollars and I'm quite impressed,
Speaker 1: and then you're telling me it needs to be eleven
Speaker 1: billion dollars, So maybe I should temper my exuberance over
Speaker 1: that amount of money, which then leads us to then
Speaker 1: there are these targets, there's money being raised, there are
Speaker 1: things being done, perhaps not quickly, enough in order to
Speaker 1: reach some of these targets. Can you talk a little
Speaker 1: bit about how one goes about tracking progress in this
Speaker 1: space and whether or not this is something that's going
Speaker 1: to come up repeatedly at cop or if there is
Speaker 1: another forum for the pressure in progress to continue on
Speaker 1: methane reduction.
Speaker 2: Sure. So again, for the past year, there have been
Speaker 2: a number of events that have focused on methane specifically.
Speaker 2: So we also had a forum in Geneva that was
Speaker 2: looking at specifically add methane from these three main emitting sectors,
Speaker 2: so oil and gas, coll energy, and agriculture. I think
Speaker 2: progress is something that at a very high level might
Speaker 2: be it would be where more work needs to be done.
Speaker 2: So we know, you know, for the companies, like we said,
Speaker 2: they had targets, they have shareholder responsibility and they do
Speaker 2: report year after year how they've done against those targets.
Speaker 2: But if we're talking more collectively, I think because we've
Speaker 2: only had you know, more and more pressure and more
Speaker 2: countries joining the methane Pledge last year, were yet to
Speaker 2: see how things have evolved. But there is there are
Speaker 2: standardized frameworks that are available to oil and gas companies
Speaker 2: for them to voluntarily join those and that would be
Speaker 2: a way, for instance, show progress. So one of these
Speaker 2: frameworks that I'm referring to is the Oil and Gas
Speaker 2: Methane Partnership two point zero, and that is a standardized
Speaker 2: reporting framework for methane emissions from oil and gas assets.
Speaker 2: The beauty of OGMP so they do have five reporting levels,
Speaker 2: and the beauty of that is that a company can
Speaker 2: join at any level, so they don't really five is
Speaker 2: the highest, but they don't have to start at one
Speaker 2: and work their way up although to five. They can
Speaker 2: start at whatever level fits best with the company's understanding
Speaker 2: of operational emissions. So these levels they start off as
Speaker 2: being very you know, aggregated reporting, and then by level
Speaker 2: four they already need to measure source level emissions. A
Speaker 2: level five they will need to do a site level
Speaker 2: measurement of their emissions and carry out what's called reconciliation,
Speaker 2: so that is comparing the site level measurement with the
Speaker 2: sum of all the source level measurements and understand whether
Speaker 2: there are any discrepancies and explain why those discrepancies appear.
Speaker 2: Another nice thing about the OGMP is that they're not
Speaker 2: technology restrictive in any way, so companies do have plenty
Speaker 2: of options to choose when it comes to detection technology,
Speaker 2: and they can even use satellites provided that they have
Speaker 2: the right resolution.
Speaker 1: So has the OGMP been popular? In effect? Who's in
Speaker 1: the OGMP?
Speaker 2: So the OGMP has attracted companies that make up about
Speaker 2: forty percent of the world's oil and gas production. But
Speaker 2: I would have to say that some important names are
Speaker 2: still missing from the list of companies. So it's mostly
Speaker 2: the upstream producers and quite a lot actually of midstream producers.
Speaker 2: But like I was saying, we're yet to see companies
Speaker 2: like Saudi Aramco or Petro China joining the OGMP two
Speaker 2: point zero. And these companies they're important to the global
Speaker 2: gas market. For instance, Aramco is the largest supplier in
Speaker 2: the Kingdom and they do have a target to increase
Speaker 2: their gas sells by sixty percent by twenty thirty. So
Speaker 2: I think in order to stay relevant, they'll need to
Speaker 2: attract more of the of other large companies.
Speaker 1: So what is the OGMP really in effect doing. Is
Speaker 1: it just reporting of data so that we can track
Speaker 1: progress or are they helping these companies actually achieve their goals?
Speaker 2: So the ODMP data will be used in conjunction with
Speaker 2: IMEO when there will be they'll be releasing this quite
Speaker 2: soon and but it won't be anything by asset, so
Speaker 2: you would know that they're reporting and maybe the number
Speaker 2: of emissions, but it won't be anything more transparent than
Speaker 2: that unless the company opts in for it. Now with OGMP,
Speaker 2: when they reach the level five, that's quite important for
Speaker 2: the EU regulations because level five OGMP is already compliant
Speaker 2: with what the EU is saying about methane regulations for importers.
Speaker 2: So if you have level five, you're kind of fine.
Speaker 2: You can still continue to import to the EU after
Speaker 2: the rules kick in, and you don't have if a
Speaker 2: member state wants to buy gas from you don't have
Speaker 2: to pay a fine. And the other thing with them,
Speaker 2: apart from the EU import, is that the level five
Speaker 2: also gives you responsibly sourced gas attributes, so you can
Speaker 2: trade that, so they're kind of beyond the just like
Speaker 2: the reporting.
Speaker 1: So you had just noted the standards that the EU
Speaker 1: has for any imported oil products. Would this be the
Speaker 1: most stringent standard that we find globally?
Speaker 2: So you are correct. The EU has adopted methane regulations
Speaker 2: and in quite a unique move they're targeting not only
Speaker 2: the domestic production, but they're also targeting importers. So by
Speaker 2: twenty twenty seven, the European Union has the aim of
Speaker 2: building a methane transparency database. So what that means is
Speaker 2: that sellers looking to export the gas to the European
Speaker 2: Union they will have to disclose their methane intensity and
Speaker 2: they'll also have to disclose the methods that they've used
Speaker 2: to measure their intent city. So it's all about transparency.
Speaker 2: And this is quite stringent because at the moment, you know,
Speaker 2: most of the rules, whether it's been in the US
Speaker 2: in Canada that they've been focused on the domestic production.
Speaker 1: So now that we've started to talk about this in
Speaker 1: terms of geography and we've established the EU has the
Speaker 1: most stringent import rules, where are the sources of the
Speaker 1: missions globally? Is this really something that's happening all over
Speaker 1: the world and is going to take quite a united
Speaker 1: effort or are there are really a few countries or
Speaker 1: continents that have the vast majority of the methane emissions?
Speaker 2: Sure? So, there have been actually a couple of recent
Speaker 2: studies where they've compared the number of emissions that countries
Speaker 2: we poured with what the satellites have observed. So although
Speaker 2: we've spoken about the inventories being imperfect, so we do
Speaker 2: have countries like the US, Russia, Venezuela, and Turkmenistan when
Speaker 2: it comes specifically to methane and look looking at the
Speaker 2: satellite data, Turkmenistan has had quite a staggering number of
Speaker 2: plumes over the past years, over one thousand and these
Speaker 2: are the sort of hot spots, so as you can see,
Speaker 2: they tend to be oil and gas producing nations.
Speaker 1: One of those oil and gas producing nations is the
Speaker 1: United States, who is a net exporter of natural gas
Speaker 1: or LNG around the world. Where do they fit in
Speaker 1: this and how stringent is the US when it comes
Speaker 1: to trying to tackle this problem.
Speaker 2: Well, the Inflation Reduction Act in the US has really
Speaker 2: been the springboard when it comes to methane legislation. So
Speaker 2: when the IRA was passed, we had the Methane Emissions
Speaker 2: Reduction Program, and that mandates the EPA to impose a
Speaker 2: fee on the excess emissions of methane from oil and
Speaker 2: gas operations. So they set a threshold based on activity,
Speaker 2: So whether you're active in the exploration and production, gathering
Speaker 2: and processing. You'd have different thresholds, and to give you
Speaker 2: an example, so if you are emitting below zero point
Speaker 2: two percent of the natural gas that you're selling, you're
Speaker 2: not going to pay any fee. But if it's above
Speaker 2: that threshold, that's liable to a fee. And the fee
Speaker 2: starts at nine hundred dollars per ton this year and
Speaker 2: it increases to fifteen hundred by twenty twenty six. So
Speaker 2: the US is where it all really started in terms
Speaker 2: of regulation, and it's not really just the fee. So
Speaker 2: the EPA is working on different ways to tackle methane
Speaker 2: or at least to address methane. So this year we
Speaker 2: also had the amendments to the Cleaner Act coming into
Speaker 2: a fource, So those are regulations that are affecting new
Speaker 2: source as well as existing source. And apart from the
Speaker 2: Cleaner Act amendments the emissions charge, the US is also
Speaker 2: looking at revising their reporting program, also formerly known as SUBPARW.
Speaker 2: So there has been a lot of momentum in the US.
Speaker 2: On top of this, I would also like to mention
Speaker 2: that the US now has a program called the Supermeter program,
Speaker 2: whereby they work with third party detection providers that inform
Speaker 2: the EPA of detections that they make, and then the
Speaker 2: EPA work in turn with operators that they identify as
Speaker 2: responsible to figure out where their emissions came from. And
Speaker 2: they're really using this in order to learn whether there
Speaker 2: are other sources not covered by the current legislation. So
Speaker 2: again a lot of momentum in the US.
Speaker 1: So this fee essentially functions as a tax. It's not
Speaker 1: going to be a market like a carbon market, but
Speaker 1: for methane it's a flat tax that is per ton
Speaker 1: and has been set and could change in the future,
Speaker 1: but isn't fluctuating. Yes, you are correct, and when they
Speaker 1: collect this money they're using it to find new sources.
Speaker 1: Are they also using it to in any way subsidizer
Speaker 1: directly tackle some of the sources of emissions or that
Speaker 1: really left to the companies themselves, and it's an issue
Speaker 1: of highlighting where those emissions are.
Speaker 2: So with the tax, I think the tension there was
Speaker 2: to try and bring in line as many operators as
Speaker 2: possible to reduce their emissions. The government has announced a
Speaker 2: number of grants and a number of financing pots to
Speaker 2: help operators reduce their emissions. So we had a program
Speaker 2: for small producing wells which have been found to be
Speaker 2: quite a significant source of emissions. And we've had other
Speaker 2: grants that were encouraging detection technology providers to come up
Speaker 2: with solutions for the As far as like I understand
Speaker 2: the money that they will collect from this tax, I mean,
Speaker 2: I'm not sure if it goes back into like methane mitigation.
Speaker 2: I think it's used for for the overall budget. The
Speaker 2: goal is that most of these companies they won't have
Speaker 2: to pay a lot. Basically, they will try to limit
Speaker 2: their excess emissions so that they don't have to pay
Speaker 2: because the tax is quite high. It is quite high.
Speaker 2: But what they've also done, they've allowed for something called netting.
Speaker 2: So this is where you can use a better performing
Speaker 2: and this is for operators that have facilities and they're commonership.
Speaker 2: So if you have several assets in the SPASIN and
Speaker 2: several assets in that basin, but if you have an
Speaker 2: asset that's performing really well in terms of emissions, because
Speaker 2: you're netting git out, you can use that to offset
Speaker 2: maybe a poorly performing asset, So that really brings down
Speaker 2: the tax that you are going to have to pay.
Speaker 2: And I don't think this was again meant to be
Speaker 2: very punitive, hence the netting. Hence everything is more to.
Speaker 1: Encourage action, encourage driving down emissions across an entire portfolio
Speaker 1: for a company, but not target specific assets. Yeah yeah, correct,
Speaker 1: but moving in the right direction. So presumably there will
Speaker 1: in the future we will see potentially some ratcheting up
Speaker 1: as these goals become more attainable. But fair enough, that
Speaker 1: is conjecture on my part, which is not how it
Speaker 1: currently functions. And the Inflation Reduction Act is only a
Speaker 1: few years old. It's still just a baby, and it's
Speaker 1: making its way through these various sources of emissions in
Speaker 1: the economy. So we've established that there are third party
Speaker 1: groups where information is being shared and companies are voluntarily
Speaker 1: signing up to better understand and declare their sources of
Speaker 1: emissions so that we can tackle the problem that the
Speaker 1: EU has stringent standards for imports, that the US is
Speaker 1: as a part of the Inflation Reduction Act, is really
Speaker 1: taking an active role in looking at how they do
Speaker 1: this also through fees or taxes. Now, with all of
Speaker 1: these initiatives taking place, and with this conversation coming up,
Speaker 1: I'm sure every year at COP in some respect on
Speaker 1: trying to see whether or not it's making progress. What
Speaker 1: are some of the ways that a company can verify
Speaker 1: that they're actually achieving these targets? And really, I mean,
Speaker 1: what's the piece of paper that they're able to electronically
Speaker 1: or otherwise push forward and certify that they're actually making
Speaker 1: progress to the outside world.
Speaker 2: Sure, So we have seen over the past few years
Speaker 2: the emergence of responsibly sourced gas or producer certified gas.
Speaker 2: So what this really means is that you get essentially
Speaker 2: a label that says you have produced your natural gas
Speaker 2: in accordance to various environmental, social and governance principles. But
Speaker 2: it is usually about the methane intensity of the gas.
Speaker 2: So there have been different providers in the space, and
Speaker 2: although there is no common standard when it comes to
Speaker 2: what represents responsibly sourced gas, these providers they do have
Speaker 2: a fairly comprehensive set of rules that a producer would
Speaker 2: have to abide by in order to get the label.
Speaker 2: So the responsibly sourced gas has already unlocked a market
Speaker 2: whereby you have a premium that's being paid based on
Speaker 2: the intensity of the fossil fuel. So the gas can
Speaker 2: trade either bundled or unbundled from what it's called environmental attributes.
Speaker 2: So these could be the methane intensity, for instance, and
Speaker 2: that's currently happening. We've done an analysis and although premiums
Speaker 2: were quite muted earlier in the air end, as you'd expect,
Speaker 2: refluctorate with the price of natural gas. Many producers see
Speaker 2: this as a way to prove to their investors and
Speaker 2: as a way to communicate to the market that they've
Speaker 2: been producing it in a way that has minimized methane vikage,
Speaker 2: for instance.
Speaker 1: So, Maria, now that you've taken a look at all
Speaker 1: of this collectively, how would you say we're doing And
Speaker 1: is methane gaining momentum in terms of reduction? I suppose
Speaker 1: that's the wrong way to phrase it. But are you
Speaker 1: seeing signs that the oil and gas industry is essentially
Speaker 1: embracing the reduction of methane or is it really more
Speaker 1: at a compliance level doing what needs to be done
Speaker 1: from a regulatory standpoint, but not really at the front
Speaker 1: and center is a priority yet.
Speaker 2: I think it has become a priority for most of
Speaker 2: the industry. And although you know, methane emissions are not
Speaker 2: really a new problem, they've been having been an industry.
Speaker 2: They have been around since, you know, the very beginnings.
Speaker 2: It's just it has received more and more attention recently
Speaker 2: as we understand what drives climate change better, and undoubtedly
Speaker 2: methane is a large contributor to that. But I think
Speaker 2: it's not uniform. So you do have places companies that
Speaker 2: are taking this perhaps more serious than the others. But
Speaker 2: I think there have been a lot of encouraging things
Speaker 2: that have happened, from the pledges that have been signed,
Speaker 2: to the investment and the financing that has gone into this,
Speaker 2: and in fact the banks they've also acknowledged that there
Speaker 2: is an opportunity when it comes to methane, and we
Speaker 2: saw last year, just ahead of cop JP Morgan putting
Speaker 2: out a white paper on the methane opportunity and saying
Speaker 2: that they will support their customers in this journey of
Speaker 2: driving down emissions. So I think there has been indeed
Speaker 2: a lot of action, although it hasn't happened at the
Speaker 2: same pace, and it's probably difficult to happen at the
Speaker 2: same pace everywhere, but the signs are very encouraging that
Speaker 2: more and more operators are taking this more seriously and
Speaker 2: are working on driving down their emissions.
Speaker 1: And so how often are you looking at this data
Speaker 1: and keeping an eye on it?
Speaker 2: So we're actually looking very often. The report that we
Speaker 2: put out where we analyze the Imeo data was our
Speaker 2: first iteration. We will be updating that now on a
Speaker 2: quarterly basis, and we're only excited about, you know, the
Speaker 2: launch of new satellites and of more data that will
Speaker 2: become publicly available. So this wave of new data, I
Speaker 2: think it will be it will be great to add
Speaker 2: more transparency and understand where where emissions are coming from.
Speaker 2: And ultimately we want this to drive action.
Speaker 1: So as the transparency increases, I'm sure we'll have you
Speaker 1: back on the show to tell us even more. And
Speaker 1: hopefully by that point I'll have decided whether or not
Speaker 1: I'm going to refer to it as methane or methane,
Speaker 1: given that I'm an American living in the UK and
Speaker 1: seem to be adapting both pronunciations today, Maria, thank you
Speaker 1: so much for joining, Thank you for having me. Today's
Speaker 1: episode of Switched On was produced by Cam Gray with
Speaker 1: production assistance from Kamala Shelling. Bloomberg NEIF is a service
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