By: Craig Webster, Managing Director ESG & Sustainability, Tudor, Pickering, Holt & Co.
Not that long ago one could have safely assumed that, when it came to operator emissions, efficient monitoring was the goal. Quickly identifying and repairing leaks and other unexpected releases was the primary objective. As ESG has evolved, that objective remains unchanged, but has been supplemented by the demand for accurate measurement and quantification of GHGs.
There is no shortage of companies, large and small, looking to bring both transparency and accuracy to oilfield emissions. Solutions range from ground-based to aerial, as well as those in orbit. Others (like Validere) calculate and validate the emissions profile of each molecule produced using a variety of available sources, including data from the companies themselves.
There are many reasons that industry has a vested interest in accurate measurement of emissions. Perhaps most importantly, as third parties (like satellites) begin to attribute emissions to specific companies without input from the companies themselves, it will be an imperative to have an accurate read of one’s own performance. Furthermore, as markets for “responsibly” sourced hydrocarbons develop, there will economic incentives which will influence asset valuation and capital allocation.
In the very near term, it is also worth considering how capital is being allocated to emissions reduction initiatives. As banks and portfolio managers rush to establish their own ESG credentials, O&G companies are being pressured to act quickly on emissions reduction and are creating priority lists for emissions reduction projects. These Marginal Abatement Cost Curves calculate the cost per tonne of CO2e abated through each initiative, thereby guiding efficient capital allocation. As better data emerges, we may find that the actual sources of emissions differ from the desktop calculations currently being used and that abatement capital has been allocated sub-optimally. While companies likely understand this, it seems unlikely that those applying the pressure spend much time thinking about it.
Fortunately, because companies do have a strong vested interest in accurately measuring their own emissions, there are a number of industry programs and pilots underway to establish the efficacy of the many promising technologies. It seems likely that the ultimate outcome will be some form of “all-of-the-above” solution which is both accurate and cheap. With greater accuracy, the markets will eventually be able to establish the true cost of emissions and the price consumers are willing to pay to avoid them.
The opinions expressed in this article are the author’s own and do not reflect the view of Tudor, Pickering, Holt & Co.
