The level of environmental scrutiny the energy industry faces seems to increase with every passing year. Natural gas, which ten years ago was promoted as a ‘bridge fuel’ to a clean energy future, is now characterized by environmentalists as a dirty fossil fuel. Wind, solar and batteries appear to be the energy of choice. Emissions free nuclear power is even an unacceptable alternative. The US has made great strides in reducing emissions over the last two decades. However, for a subset of the US this is not enough. In this Energy Market Commentary, we will look at historical trends in methane emissions, the energy industries response and evolving technology to monitor fugitive methane emissions going forward.
As shown below, US emissions peaked in 2007 and have been in decline ever since. While the 2008 recession played some role in the decline that year, much of this reduction in emissions is due to structural changes. These changes include at the consumer level increased automobile CAFE standards, proliferation of compact fluorescent light bulbs and efficient Energy Star appliances. In electric generation, another driver has been broad coal-to-gas switching driven by low priced shale gas production since 2008. Recently, broader adoption of utility scale wind and solar have also helped.
According to some politicians, the world now faces a ‘climate emergency’ and fugitive methane emissions reductions are a target. As shown below, methane emissions come from many sources, however energy production and agriculture are the largest contributors. Note, as measured by the EPA, US methane emissions have gone down while US energy production has climbed higher since 2008, when unconventional production started.
The US energy industry has begun to respond to the increased levels of environmental scrutiny. ESG (environmental, social and governance) reporting by energy companies is becoming standard with midstream companies such as Kinder Morgan and Crestwood recently launching ESG reporting. Producers such as Southwestern and Cabot now self report on fugitive methane emissions. And through the One Future Coalition , a membership of natural gas companies, is targeting less than 1% methane emissions from the natural gas supply chain by 2025. In 2017, the coalition reported 0.552% methane intensity, well ahead of the 2025 target.
In the world today, technology driven disruption has become the norm and fugitive methane emission monitoring is no different. SpaceX has rejuvenated the US commercial space launch capability. The result has been a major uptick in commercial launches at substantially lower costs. Pre-SpaceX, US commercial launch costs in 2014 were estimated at $400 million while a current SpaceX launch is estimated at $62 million. Meanwhile, remote sensing satellite technology has massively improved accuracy at dramatically reduced size resulting in 684 earth-observing satellites in orbit in April 2018 compared to just 192 in January 2014.
One result is the Environmental Defense Fund plans to launch MethaneSAT in 2021. This satellite has a methane emission sensor with a 124 mile wide view with 0.6 mile resolution. It is expected to orbit over 50 major oil and gas producing regions accounting for 80% of global production in 7-day intervals. EDF plans to publish the methane sensing data feed in real time on its website in the public domain.
Many energy companies today monitor for methane emissions using a multitude of technologies including drones, fixed wing aircraft flyovers as well as on site handheld monitoring. While MethaneSAT will not be as accurate, it will place information out for all to see. As always, the more transparent energy companies can be today, the better. Benchmarking assets, and reporting to the public is key. MethaneSAT may reveal the US runs a pretty tight gas transportation and distribution system. Consider a comparison of a flyover of the US (where there is an open and transparent market for natural gas) compared to a flyover of West Africa, Russia and the Middle East. BTU Analytics frequently speaks at company board meetings on the ever evolving energy market landscape, request more information here.