Catalyst with Shayle Kann - Why are we still flaring gas?

Episode Date: August 29, 2024

Oil producers waste a lot of natural gas. Last year they flared 150 billion cubic meters of associated gas into the atmosphere, equivalent to about half the global carbon emissions of aviation over a 30-year period. So why are oil producers burning a valuable commodity like gas? In this episode, Shayle talks to Tomás de Oliveira Bredariol, an energy and environmental policy analyst focused on methane at the IEA. So far, multiple major global initiatives haven’t made a dent in flare volumes, which have remained largely flat since 2010. Shayle and Tomás talk about the reasons why and the potential solutions, covering topics like: The nine countries responsible for about three quarters of flare volumes Why we don’t just build more pipelines Why oil wells may choose expensive diesel instead of powering their equipment with associated gas Converting gas into more valuable forms, like compressed natural gas, liquid natural gas, or methanol The potential for regulation and financial incentives to push producers to cut flare volumes Recommended resources International Energy Agency: Curtailing Methane Emissions from Fossil Fuel Operations National Renewable Energy Laboratory: Stranded Natural Gas Roadmap World Bank: Global Gas Flaring Data Catalyst is brought to you by Anza Renewables, a data, technology, and services platform for solar and storage buyers. Anza’s real-time market intel equips buyers with the essential data they need to get the best deals. Download Anza’s free Q2 Module Pricing Insights Report at go.anzarenewables.com/latitude  Catalyst is brought to you by Kraken, the advanced operating system for energy. Kraken is helping utilities offer excellent customer service and develop innovative products and tariffs through the connection and optimization of smart home energy assets. Already licensed by major players across the globe, including Origin Energy, E.ON, and EDF, Kraken can help you create a smarter, greener grid. Visit kraken.tech. Catalyst is brought to you by Antenna Group, the global leader in integrated marketing, public relations, creative, and public affairs for energy and climate brands. If you're a startup, investor, or enterprise that's trying to make a name for yourself, Antenna Group's team of industry insiders is ready to help tell your story and accelerate your growth engine. Learn more at antennagroup.com.

Latitude Media, podcast at the frontier of climate technology. I'm Shail Khan, and this is Catalyst. The fact is that since 2010, we haven't really made a dent on flared volumes. They've gone a bit up and a bit down, but really stayed at very, very high levels. For all the work we put into producing and selling natural gas, it is wild how much we just flare. When utilities need flexible capacity they can count on, they turn to Energy Hub. Energy Hub works with more than 170 utilities, coordinating over 2.5 million devices to manage 3.4 gigawatts of flexibility, built for the moments when utilities can't afford uncertainty.

Energy Hub builds and operates virtual power plants that utilities actually stake their grid planning on, coordinating EVs, batteries, thermostats, and more through a single platform built for utility scale. Predictive, verifiable, and designed to perform. when it counts. Learn more at Energyhub.com. Trillions of dollars are flowing into clean and critical infrastructure, but those investments aren't driven by technology alone.

They're shaped by markets, by policy, by capital, and by the institutions that connect them. I'm Alfred Johnson, CEO of Crux, and host of a brand new podcast, Critical Capital. Each episode, I talk with people deploying capital, shaping policy and building the clean economy.

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Fish Tank PR. To learn more about Fish Tank's approach, visit fish tankpr.com. That's F-I-S-C-H-F-T-T-T-T-R. com. I'm Shail Khan. I invest in revolutionary climate technologies at energy impact partners. Welcome.

Well, I've always thought that methane flaring is sort of the weirdest kind of market inefficiency. I mean, natural gas is the second largest volume traded commodity in the world behind oil.

So if there are ever a market where there shouldn't really be a significant amount of unnecessary waste, you would think this would be it. And yet, we do it. A lot of it, actually. We take methane that has been co-produced from oil fields and we burn it and release into the atmosphere with no economic value.

The only reason to do it is because if we didn't do that, we would be venting it and releasing methane into the atmosphere, which is worse. And so there's a good reason for flaring if your alternative is venting. But still, doesn't it seem like this should be solvable? So to try to figure that out, I chatted this week with Tomas de Oliva Braderial, who is an energy and environmental analyst at the International Energy Agency, the IEA, focused on methane and has written a lot about flaring. Here's Thomas.

Thomas, welcome. Thank you. Thank you so much, too. Let's talk about gas flaring. So I think our listeners probably know what gas flaring is, which is where we take natural gas coming out of the ground from an oil field mostly and burn it. We oxidize it such that we release mostly CO2 into the atmosphere instead of instead of methane.

The basic question, though, is why? Why do we do this? It obviously has value. We also drill for plenty of natural gas and we certainly want to capture that. What are the circumstances that lead to flaring today? Yeah, there are multiple reasons why operators flare. the main one is because they're mostly interested in the oil that is being produced, and they don't have an easy way to export the natural gas,

either through a pipeline or through other means to reach a market. But there are other reasons, right? We often hear about routine gas flaring and non-routine gas flaring. Now, the routine glass flaring is what is associated with these cases where you're producing natural gas, you don't have anything to do with it, and then you're sending it to flares. Now, the non-routine natural gas flaring is associated with upsets. So maybe you had an incident in your plant, you need to shut down production,

you need a safe way to dispose of your gas. So that's another reason for natural gas flaring. And it has side to two key issues. One of them is environmental. You burn the natural gas because that reduces its climate impact, and the other is for safety reasons. If you vent your natural gas, you have a high hazard. It can explode. It might also bring damage health of communities nearby or the workers. So those are the two main reasons. Now let's go just one step deeper on the climate front,

and perhaps we can understand a bit better there. Natural gas, is composed mostly of methane, about 90% of natural gas is methane. And if you look at the climate impact of methane and compare it to carbon dioxide or CO2, on let's say 20 years, it's about 80 times more harmful to the climate. If you look at 100 years' time frame, then it's about 30 times more harmful. So it's much more potent greenhouse gas than CO2. So if you compose natural gas, you transform methane into CO2 and you reduce its climate impact. Yep. So just to clarify on the situations that lead to flaring, in the routine flaring context, what you're describing there is you're drilling for oil, right? You're producing oil. You happen to co-produce some natural gas. It's not enough, presumably, for you to justify a natural gas pipeline to do any collection and aggregation there. It's a small enough volume.

or is it some other thing that stops you from putting the infrastructure in place to take advantage of that natural gas? Again, multiple different reasons. The one you outlined is certainly an important one, but it can also have to do with the timing or the interest of operators. Maybe we can take an example here. In the United States, flaring increased by about 20% last year, and most of this increase came from the Permian Basin.

The payment basin is the main producer of unconventional resources, right? And unconventional oil wells, they produce relatively small volumes of associated natural gas, and they produce it for a relatively short amount of time. The volume decreases quite rapidly, as does with oil, right? And so they don't have, the operators don't have much of an incentive to go and build a pipeline for that short span of time where they will be producing a significant amount of natural gas. And so it's essentially a question of economics.

In some cases, it's about the type of the reservoir or the location of the asset. It may be that it's very isolated and it's easier to transport oil than it is natural gas, or that in specific context, it could be that the operator is very interested because the price is for oil are much higher than the prices for natural gas, and it's just after the oil. So different reasons there, but essentially it's about the economics of the project.

All right, so let's talk about how big a deal this is. I think there's two lenses through which you can look at that. One is an economic lens. How much energy in the form of natural gas are we essentially producing and then wasting by flaring it? We'd also be wasting it by venting it for what it's worth. But either way, how much are we wasting? And then the second perspective is an emissions perspective, despite the fact that we are oxidizing it and turning it into CO2, we are still releasing CO2 into the atmosphere. So from an emissions perspective, how much emissions is coming from flaring?

So we have about 150 billion cubic meters of natural gas being flared last year. These are the latest data from the World Bank. And if you want a comparison point, Norway's natural gas production. was about 120 billion cubic meters. So we flared more natural gas than Norway produced. And Norway is the top, the largest producer of natural gas. So it's very, very material. You can also think about this on a kind of time series,

and the fact is that since 2010, we haven't really made a dent on flared volumes. They've gone a bit up and a bit down, but really stayed at very, very high levels. There's been some progress on flaring intensity, so the amount of gas that is being fared by the amount of oil that is being produced, but it's fairly marginal,

especially when we consider all the different climate targets there. The zero routine flaring initiative from the World Bank, the global methane pledge, the oil and gas de-carbonization charter, there's been a lot of pledges by both governments and companies that they want to reach zero routine flaring by 2030, and we're just not seeing the levels of progress that we need to get there. Now, what does this mean in terms of emissions?

This 148 billion cubic meters led to about 500 million tons of CO2 equivalent. So that includes both the meeting component and the CO2. Now, why is there a methane component? We're just mentioning that you burned gas so that it doesn't release methane. But the reality is that you can't achieve 100% combustion efficiency. Even if they're operating at optimal conditions, you might get to 99.8%, but you won't get to 100%. And quite often, flares do not operate in optimal conditions. And in many cases, they operate unlit because maybe there was an upset in the facility, or there were strong winds, or there was no adequate maintenance or monitoring.

So there could be large periods of time where flares are operating unlit. And so all of this leads to methane emissions. And overall, we at the International Energy Agency estimate that the combustion efficiency of flares globally is at. around 92%. That's a much lower number than what you might hear from the industry. They will offer refer to 98%. But it's in line with several scientific studies and a lot of data that is coming from the scientific community. Okay, so just to repeat it then, what's the total, in CO2 equivalent terms, so if we include both the methane and the CO2 that gets released as a result, how much globally emissions are we seeing from flaring? Considering a global warming potential for

meeting of 30, that's in a 100 years timeframe, that would be over 500 million tons of CO2 equivalent. That's more than all international flights last year. And it's just a bit below all the CO2 emissions from Korea's energy sector. It's a lot of emissions. It's like 1% of global emissions, basically, right? If we do roughly 50 gigatons of emissions a year. So it is a lot. I presume that it is not uniform across geographies and play types and so on. My guess is that we flare a lot, proportionally a lot in some places and very little in others. Is that true? And if so, how should we think about the geographic breakdown of flaring? Absolutely. That is very true. For over a decade, gas flaring around the world is concentrated in nine countries. That's Russia,

Iran, Iraq, the United States, Venezuela, Algeria, Libya, Nigeria, and Mexico. If we look at data for last year, these top nine countries were responsible for about 75% of all third volumes, and they accounted for just 45% of global oil production, around 45%. So interesting thing there, right, like some of those names, you talk about Russia, Iran, Iraq, so on. You could imagine, okay, these are probably markets that don't have a lot of regulation, and all things equal, flaring has a cost. I mean, as you said, there's a reason to do it that's safety-related, but you set that aside. Flairing has a cost, and so operators, all things equal, probably won't do it unless they are forced to. The United States being on that list, though, is interesting.

Do we disproportionately flare in the United States relative to our production? No, if you look at the average global flaring intensity, the United States is a good performer. It's not among the best, certainly, but it's a relatively good performer. But we need to remember... You just produce a lot. A lot, exactly. It's the larger soil and gas producer. Got it. Okay, so you mentioned some countries have had goals about reducing routine flaring and so on. You know, I think the thing that's interesting about this is you've got clearly a resource that, you know, a resource that. that should have economic value that is being produced by producers who should all things equal

be able to extract economic value. They are in the business of extracting and producing and selling hydrocarbons. And methane is another hydrocarbon that they should be able to produce and extract and sell. So, or at a minimum, you know, make sure that we don't really sit in the atmosphere. It seems like there are a bunch of different things that you can do as alternatives to flaring. And I guess I want to talk through each of them and talk about the trade-offs in which ones have most promise in which situations. The first thing, which we sort of breezed over, but we should talk about for a minute is, well, just put in the infrastructure, build the pipelines. Now, you made, I think, a good point as to why you wouldn't

always do that. The volumes could be small, the decline curves could be too rapid, and so you're going to have a bunch of stranded infrastructure if you do that. Are there some cases in which actually it does make sense to build pipelines? We're just not doing it yet. Absolutely. We're We did an assessment last year, a report looking at emissions from oil and gas, and we had a focus on flaring. And when we look at the 8,000 or more flaring sites across the world and we take into account existing pipelines, demand centers, and other characteristics, the majority of these sites could probably use a connection to a pipeline. of these are actually quite close to an existing pipeline.

It's about adding perhaps 10 or 20 kilometers to go and get to that trunk or getting an agreement in place with the one that is holding the right to use the pipeline or owns the pipeline. So certainly pipelines are a big part of the solution. They're not all of it, but they're perhaps the leading solution in many cases. Okay, so one option is get the infrastructure in place. The second one that seems on the surface to be fairly obvious, you have this energy that you are pulling out of the ground in the form of natural gas. And oil fields use energy, right? Obviously, you have compressors and pumps and things like that to run the production system to produce the oil. So why not just use the natural gas on site to power your oil field?

Many companies do that, and there's certainly room for more. If you look at the industry as a whole, most of the facilities are running some amount of diesel generation, and that could be replaced by natural gas. And also, there's quite a lot of room to electrify facilities and use more electricity in certain ways. So there's certainly a role for natural gas to produce power on site to feed into these facilities. Now, that's not the only way to use natural gas on site. You can also do. range action, which is perhaps another technology we should speak about. But why don't, I mean, again, if you're importing, my presumption is if you're trying to get diesel to site and then you're using diesel to produce power, it's very expensive.

On-site produce, co-produced natural gas, all things equal, should be extremely cheap. So just it should be in producers' economic interest to use that if they have the demand on site. What's your sense of why they don't do more of it? It could be related to the quality of natural gas. In many cases, you need to process and purify to remove CO2 because it's acid or remove hydrogen sulfides or remove some of the liquids there and there so that you can use it for power generation. And that's an additional hurdle that they need to do. It's certainly feasible and many operations do use natural gas for generation, but there's room for more.

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Trillions of dollars are flowing into power plants, transmission lines, battery factories, data centers, but the future of energy isn't shaped by technology alone. It's shaped by markets, by policy, by capital, and by the institutions that connect them. I'm Alfred Johnson, CEO of Crux, the capital platform for the clean economy. Join me for my brand new show, Critical Capital,

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Are you wondering why your competitors are getting press and you aren't? Fish Tank PR is an award-winning climate and energy tech, renewables, and sustainability-focused PR firm dedicated to elevating the work of both early stage and established companies. Whether you need to position yourself as a thought leader in between project announcements or translate complex ideas and technologies into tangible, compelling stories that resonate with the media, fish tank can help. Check out fish tankpr.com. That's f-i-s-c-h-h-fish-tankpr.com. Okay, so you mentioned reinjection, just put the natural gas back underground. What are the dynamics at play there? I mean, you're not putting it to productive use, so it is a pure cost. as flaring is, right? More or less, right?

Because it can increase the amount of oil that you are producing. Oh, it's like EOR. Especially in the long term. For EOR. Exactly. Yeah, exactly. Okay, so again, like economically then, you should totally do it. And why don't, I guess it's, I keep coming back to like these things.

I'm like, all right, like, there are enough of these solutions that seem like they make sense on the surface that, but we're not doing it. And I can't quite figure out if it's like, I'm wrong that the economic, generally makes sense for at least one of them? Or it's that like operators just need a shove in some form or another? I would say that operators definitely need a shove, but there's a reason why they're not doing it. Many of them are conscious of the fact that flaring is a very harmful practice and they want to reduce it. But perhaps they have better investment opportunities.

They are more interested in investing in perhaps drilling a new oil well or improving their production facility and it's just maybe using natural gas is economical but not to that extent. And in some cases it will not be economical, right? There might be cases where you have very low volumes and then putting in place to infrastructure doesn't make economical sense for them. But going back to reinjection in particular, there's also a question of the characteristics of the reservoir. You can't reinject natural gas in every reservoir.

It depends on the pressure and other characteristics of the reservoir that might allow you. And also on the stage of the projects, right? Maybe if it's a very new project, you're not interested in indexing a lot of natural gas, whereas perhaps if it's a more mature project, that's a bit more viable. So there's also a couple of, or maybe many things you can, other things you can do to put your otherwise flared natural gas to productive use. I guess I'll list three of them and just interested in your perspective on the tradeoffs amongst them. One of them is, okay, you don't have the pipeline infrastructure, so it's hard to move it.

But, of course, we produce compressed natural gas. We produce liquefied natural gas in other contexts. Why not turn it into CNG or LNG, and then that makes it easier to transport without a pipeline. So that's one thing. A second thing is turn it into another useful fuel. So, for example, small-scale methanol production. using your methane that you produce from co-production with oil. And then a third, which actually is happening a bunch,

is just use that methane because it's so cheap, but it's out in the middle of nowhere, to power a data center. And mostly what you see happening right now is use that to power a Bitcoin mine because you can put a Bitcoin mine kind of anywhere, and a Bitcoin mine is super sensitive to the cost of power. So those are all, in my mind, in a bucket of, like, figure out a way to use the natural gas. even if you don't have a pipeline.

And I'm curious how you think about them relative to each other and particularly the sort of economic trade-off amongst the three. Right. Yeah, those are all interesting alternatives for places where you can't really build a pipeline. And they will still have a number of conditions attached, right? For mini-CNG or mini-LNG, you still need to have roads or perhaps access to the sea or a waterway so that you can export it through barges. And that might not always be the case.

In the case of generation for data centers and so on, that's an alternative that it's seeing some use in the United States. I'm not sure how applicable it would be to other places. I guess it depends a bit on the specifics of that market. But all of them are, you know, and perhaps going a bit more on what would lead you to choose one of them. CNG would be more for lower demand and lower volumes of natural gas, mini or microcNG. You might be using it for car fleets, but you're probably not going to use it for trucks or

other means of long-haul transport, whereas LNG, mini-LNG and microalmg might be more suited to these larger volumes that will meet this kind of demand. Gas to methanol and gas to liquids in general, they are much more expensive projects. I would say that in general, just as broad lines, it will certainly depend on the details of the project. You would go for a mini-cNG to mini-LNG to GTL in terms of prices. So I think there are relatively few cases of small scale

gas and ethanol and gas to liquid conversion plants because of their costs. So they really only make sense in specific cases where you will have clear demand for that project that you will be producing. And then it makes economic sense, but otherwise not really. This also relates to if we're talking about onshore or offshore facilities, right? If we're talking about offshore, then there are much more limitations about what you can actually do. All of those options are more on the table for onshore.

maybe offshore you can do EL&G, but otherwise all of those options are kind of off the table. Okay, so we've talked about a bunch of the different things that you could do. Are there other considerations we should be thinking about with regard to how to reduce flaring overall, or at least the emissions impact of flaring? Well, there are two more things that we can talk about when we're thinking how we can reduce flaring volumes. One of them is going back to the issue of upsets. So maybe two-thirds or 70% of all flared volumes. are these continuous flares that are operating every day and are essentially a way to get rid of

this associated gas. But the rest are more periodic issues. These may be you're doing a maintenance or you have a problem. And in this case, what can you do? And this is more about improving your management. It's about looking at monitoring of the production conditions, better planning, perhaps bringing on-site portable devices for small interventions and things like that. So there's a broad range of solutions to flaring that are more focused on this kind of short-term and better management practices. And then the last, say, group of technologies that is perhaps worth highlighting is related to the combustion efficiency.

As we covered here, this can be a major problem. And there are many ways and many technologies in quite recent developments in this field of companies that are looking for to enable continuous monitoring of combustion efficiencies so that you can get all the ratios correct in terms of your flows and your speeds and your temperatures and reduce as much as possible for your emissions. I guess one of the question I have in terms of how to think about both where flaring happens and doesn't happen and also what to do if. instead of flaring, if you can, is the scale of an individual operation or an individual company. Like you said, we increased flaring by 20% in the U.S. last year, predominantly in the Permian. Now, obviously, that's a large producing region. I would have thought the reverse, right? I would have thought that you tend to flare a lot in small regions, less infrastructure,

probably smaller operators, whereas in places like the Permian, we've got it all buttoned up and there's infrastructure and everybody knows what to do. It sounds like that's not perfectly correlated. No, it's not perfectly correlated. It has to do with the size and type of operators, certainly. Larger operators often will have easier access to capital and also easier access to other infrastructure and other facilities makes it a little bit easier to deal with flaring,

whereas smaller producers, independent operators might have more of a hard, time dealing with these issues. And they might also have less in terms of clear targets, reporting and kind of requirements attached to financing going to them. It depends, certainly, from operator to operator, but that's part of the issue. Another important part of the equation is how much is going into the flares. If you look at kind of the general distribution of flares, most of the volumes are in what you might. might call middle-sized flares, but there's a large contingent which is small flares. And then it's where the economics might become a bit more challenging.

And certainly the permian is a region where you have a lot of oil and gas operations, but they might still be relatively dispersed. And getting to a pipeline might not necessarily be easy, especially for an individual company and someone that doesn't have all the connections with all the other producers that are operating nearby. All right. So I guess just to wrap up, in your view, I mean, it seems like we have a lot of flaring globally.

In some locations that we're probably not going to get to do a whole lot about, I'm not sure we can solve flaring in Iran immediately or maybe Russia, certainly should be able to go from being a relatively good actor to a great actor in the United States and some other countries. What's it going to take for us to do that? There's lots of different options. it's all kind of situation specific. Do you have a view on what needs to happen

to really get a hold on flaring and try to, one, reduce it to the bare minimum and two, if we're going to do it, then make sure that we're capturing and flaring as much of the methane as we possibly can? I would suggest that the most important thing is guiding regulations in place. The industry can do a lot on a voluntary basis,

but there are a number of barriers. we've talked about some of them that will not get resolved and they won't. As we discussed, they need a little bit of a bunch. And to be honest, this has happened in different places, right? In Norway, we can mention them again since 1971. If I remember correctly, there's no routine flaring. It's been prohibited and operations go on perfectly well. And there are also good cases of developing countries.

where it might be a bit more challenging. You mentioned Iran, Russia. But if we look at Nigeria, for example, as recently as 2000, they were fairing about 20 billion cubic meters per year. And now they're fairing about six. Now six is still a lot. There's a lot that still needs to be improved,

but it's a big reduction, right? Maybe 70% or something like that. And that was due to a combination of new regulations, fiscal incentives, encourage investment and infrastructure, and LNG export facilities. So there will be a range of different issues. This will be about addressing infrastructure barriers. This will be about having better financing. This will be about getting the information to these operators as well,

because in some cases, people are just not aware of all the different technological solutions that are available to reduce flaring, but it's definitely possible. All right, Thomas, this was illuminating. Thank you so much. You're welcome. It was a pleasure. Thomas de Oliveira Brederiel is an energy environmental policy analyst at the IEA focused on methane. This show is a production of Latitude Media. You can head over Latitudemedia.com for links to today's topics. Latitude is supported by Prelude Ventures.

Prilud Beck's visionary is accelerating climate innovation that will reshape the global economy for the betterment of people and planet. Learn more at Preludeventures.com. This episode was produced by Daniel Waldorf, mixing by Roy Campanella and Sean Marquan, theme song by Sean Marquan. Stephen Lacey is our executive editor. I'm Shail Khan, and this is Catalyst.