Global momentum behind climate change mitigation has, once again, brought the high-levels of fugitive emissions from upstream oil and gas into the fore. According to the International Energy Agency’s (IEA) 2021 update of its Methane Tracker, globally, the sector emitted more than 70 million tonnes (mt) of methane into the atmosphere in 2020. This is broadly equivalent to the total energy-related CO2 emissions from the entire EU.

The sector has been persistently poor at tackling these emissions, which tend to occur by flaring, venting, or undetected leaks. Discharges of methane, which is 84 times more potent as a greenhouse gas than carbon dioxide, did actually fall in 2020 by an estimated 10% compared to the previous year. However, the IEA found that this was due to producers slashing output in response to the historic shock of the Covid-19 crisis, rather than industry action.

A 2020 report looking at anti-flaring policies highlights that by 2010, flaring had fallen by 20%, but that there has been no overall decline ever since, even after the collapse of oil prices in 2014. This is despite emission reduction pledges by several major oil and gas companies.

Inertia in tackling the problem

Governments are finalising the details of their net-zero roadmaps and Jennifer Cogburn, gas Americas lead at BloombergNEF, says that the industry faces a ‘reckoning’ in regards to methane emissions and flaring, which is currently largely unregulated.

“Cleaning up that aspect of the supply chain will be important for decarbonisation,” she says.

Similarly, Maarten Wetselaar, integrated gas and new energies director at Shell, speaking at the Energy Institute’s (EI) International Petroleum Week (IP Week) in February, said that the issue could become ‘existential’ for the sector if not tackled.

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By GlobalData

Previously, it had been hard to measure fugitive leaks from oil and gas operations, but technology is getting better. GHGSat Inc, a Canadian company that hopes to become the global reference for remote sensing of greenhouse gases, uses satellite technology to monitor leaks.

In February, the company detected a discharge of methane of as much as 10,000kg per hour, for several hours, from at least eight natural gas pipelines and unlit flares in central Turkmenistan. Drones and modern, low-cost sensors can also be used to detect leaks.

Nevertheless, at IP Week, it was highlighted that 70% of gas producers in the US don’t have a plan to tackle methane emissions. The US and Russia are two of the biggest offenders according to another analysis. Former US President Donald Trump had reversed Obama era rules that required producers to monitor and fix leaks, despite protestations from the industry itself.

Nick Turton, the EI’s external affairs director, says there needs to be a culture of change within the sector that ranks the issue alongside other important ones, such as financial propriety and safety.

“It’s got to be at the heart of investment decisions in the boardroom, day to day operational activities, and on individual sites. The industry’s not there yet,” he says.

The EI is a supporting organisation of the Methane Guiding principles, which are based on building methodologies to measure and design standards and the best practices to reduce emissions. The principles are now followed by 23 operators.

Taking action

The IEA’s country-specific methane cost curves say that many abatement measures would pay for themselves, provided the captured gas can be delivered to market and sold at the going market rate. Adding to that: “this simple cost analysis suggests companies should be willing to undertake some of these actions voluntarily”.

Several oil and gas majors have announced methane reduction targets. Aim 4 of BP’s net-zero strategy is to install methane measurements at all its existing major oil and gas processing sites by 2023, publish the data, and then drive a 50% reduction in methane intensity emitted at its operations.

The company has also established a new methane intensity target of 0.20% by 2025. However, it’s not clear how BP will reduce these emissions and the company declined to comment when asked.

Total says that its methane emissions stood at 68 kilotons in 2019, representing an emission intensity of around 0.2% of the commercial gas produced on operated upstream oil and gas facilities. Its  objective is to reduce that intensity below 0.1% of the commercial gas produced. Total says that it has committed to zero routine flaring by 2030 and says  that it has already cut methane emissions by 45% since 2010.

In 2018, Shell also announced a target to keep methane emissions intensity for oil and gas facilities operated by the company below 0.2% by 2025. The target will be measured against a baseline Shell leak rate, currently estimated to range from 0.01% to 0.8% across the company’s oil and gas assets. Since 2019, Shell’s senior executive pay has been linked with progress against this ambition.

Speaking at IP Week, Wetselaar said: “No supplier wants their product to leak and it’s possible to keep emissions down with basic technology, therefore this shouldn’t be a barrier.”

As part of the Oil and Gas Methane Partnership, many other firms agreed to new methane reduction targets in late 2020 – reducing methane emissions by 45% by 2025 and by 60% by 2030 (relative to 2015 levels). Meeting these targets could reduce methane emissions from 13% of total upstream emissions to less than 5% by 2030, says Wood Mackenzie.


Reducing methane from the industry is ‘among the most cost-effective and impactful actions’ that governments can take to achieve global climate goals, according to the IEA. And it’s clear that voluntary actions and guidelines are not enough to secure industry wide compliance.

“The challenge on climate change is so huge and urgent, voluntary action won’t get us there fast enough given the pace that’s required ,” says Turton.

At IP Week, Wetselaar called for the issue to be regulated to create a level playing field, adding that the EU and US President Joe Biden should work together to declare equivalence, especially for LNG.

Non-profit environmental group Earthworks is calling on Biden to legislate a reduction on methane emissions from oil and gas production by 65% within the next five years. US industry body the American Petroleum Institute has said that it is willing to work with the government to formulate regulations.

Furthermore, the EU is considering binding standards for natural gas to limit emissions of methane. But most notably, the European Commission is expected to launch a Carbon Border Adjustment Mechanism later this year to maximise the impact of taxation in meeting the EU’s climate goals.

This new mechanism would put a carbon price on imports of certain goods from outside the EU, possibly including oil and gas, that do not meet the same environmental standards as those domestically produced.  

This could be a ‘gamechanger’ says Turton: This will mean it’s not just the fuel produced inside the EU that will be regulated but those brought into the bloc from outside. If there are requirements to tackle methane in all of their supply countries – the US, Russia, North Africa – then that really starts to spread best practice.”

Oil & Gas UK energy policy manager Will Webster, who says there are discrepancies between IEA estimation of methane emissions and trade bodies and government, notes: “It may be a challenge in some cases to reduce methane emissions while demand increases; however, the industry remains committed to its 2030 objective [to halve emissions].”

But he adds: “There is a part for government policies and frameworks to play in incentivising early action by companies, pushing for transparency, improving performance, and supporting innovation to achieve results.’ 

However, a paper by academics Raphael Calel and Paasha Mahdavi warns that regulation on flaring in particular could be counterproductive as companies shift from flaring, which is easily detected by satellites, to venting, which is less precise and more expensive to detect at scale. Even a small increase in venting would be enough to create a net increase in global warming, the authors note. 

Increasing pressure

Tolerance for big emitters, however, is thinning. Turton says that there are three things influencing oil and gas companies now.

Firstly, the science of climate change, and the real world impacts are so clear now, which has  reinforced public sentiment calling for action, particularly for those big oil and gas companies that are household names,” he says. 

“There’s now real reputational risk of inaction. Even more important in this context is investor sentiment: BlackRock recently said it wants to invest in companies with net-zero game plans. Lastly, technologies are improving to help tackle the problem; remoteness and continual monitoring can be managed with satellite detection, drones, and new sensor technologies.” 

Recently, S&P Global Ratings warned in January that it may cut the credit score for a plethora of oil companies due to “greater industry risk” and climate change. Such a move could increase their cost of capital and potentially put new projects at risk. Last year, France’s Engie backed out of a reported $7bn, 20-year contract to import US liquefied natural gas due to concerns about methane emissions associated with the product. 

Overall, Turton is hopeful for future action: “This year has seen the most bold moves by the oil and gas industry on climate change. For natural gas, in particular, to have a longer-term future, it needs to demonstrate that it’s not emitting highly potent greenhouse gases at production. That’s the real issue.”