Investors are now targeting oil and gas companies and pressuring them to be more transparent when it comes to disclosing their methane emissions, which are about 80 times more potent than CO2 releases tied to global warming.
That’s why the Principles for Responsible Investment (PRI) is rounding up the support of the investment community to get those energy companies to measure their methane releases, report them to shareholders and to work to capture them by using “off-the-shelf” technologies. The methane could then be resold and the oil and gas companies would have a positive pay-back. Altogether, PRI says its initiative represents 35 investors who control $4.2 trillion.
“We are starting to see more forward leaning companies,” Sean Wright, senior manager at the Environmental Defense Fund (EDF,) said in an interview. “This is a growing area of concern and we need oil and gas companies to get ahead of it and to be responsive. We will be separating the leaders from the laggards. When we do that, there will be consequences for those that they may fall behind.”
Natural gas, of course, has become the fuel of choice — a fuel that markets itself as far less pollutive than coal. But methane is its main component, which is 84 times more potent than CO2, although its lifespan is 20 years compared to 100. Indeed, methane makes up about 25% of the global warming today, says the EDF.
EDF, in fact, says that oil and gas is concerned about its brand and has thus formed the Oil and Gas Climate Initiative — a $1 billion initiative to accelerate low-carbon technologies. The main focus, it says, is advanced carbon capture and storage as well as to limit and capture methane releases. The oil companies taking part are BG Group, BP, Eni, Pemex, Reliance Industries, Repsol, Saudi Aramco, Shell, Statoil and Total
ICF International figures that oil and gas companies could cut their emissions by 40% below the projected 2018 levels. And it wouldn’t be expensive — less than one cent per thousand cubic feet of natural gas produced. That amounts to a capital investment of $2.2 billion, which which Oil & Gas Journal data shows to be less than 1% of annual industry capital expenditure.
“To reduce financial, regulatory and reputational risk associated with methane, investors need to understand companies’ relative performance in managing methane risk” said Gemma James, manager, environmental issues at the PRI.
“Engagement on the topic not only identifies where the risk exposure is but establishes opportunities for improved methane management,” he concludes.
The methane rule, enacted in May 2016, had been part of the Obama administration’s overall effort to cut the level of methane emissions by 40-45 percent by the year 2025, from 2012 levels. If escaping natural gas could be captured and resold, industry could increase its revenues by as much as $188 million a year, it added.
The U.S. Court of Appeals for the District of Columbia ruled that the Trump administration must immediately begin enforcing the regulation after it had tried to delay its implementation.
Trump’s EPA had been more sympathetic to the oil and gas producers, who said that the rule is too onerous and that it duplicates those already monitored by the states. For industry’s part, it points to report released in March showing that methane emissions from all petroleum systems decreased by 28 percent since 1990.
“What we are seeing around methane is a highly potent form of carbon risks,” says EDF’s Wright. “Investors have an incentive to manage properly this and to bring that wasted product in the pipeline. They can capture it and re-sell it using off the shelf technologies.”
Corporate governance and environmental management go hand-in-hand. Companies are thus under greater pressure to disclose their non-financial metrics, which in this case is not just CO2 but also methane releases. It’s ultimately about bettering both the environment and the bottom line — and something that will drive a competitive advantage while building brand loyalty.