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Energy Industry ‘Very, Very Close’ to Voluntary Methane Emissions Reduction Program, Says Shell Exec

The American Petroleum Institute is getting "very, very close" to formally adopting a voluntary program to curb methane emissions from the oil and gas industry, Royal Dutch Shell plc's Greg Guidry, executive vice president of unconventionals, said this week.

Speaking at the North American Gas Forum in Washington, DC, on Monday Guidry said the "very comprehensive program" would go into effect in January. "It's focused on the three primary sources of fugitive emissions based on all of the studies through" the Environmental Defense Fund, the University of Texas at Austin and others.

Guidry’s announcement preceded that of the Bureau of Land Management, which on said it plans to suspend the Obama administration's venting and flaring rule for oil and gas producers. He told the audience that the industry can't rely on future administrations to have the same regulatory mindset.

"The idea is that we demonstrate self-control and self-improvement over the next few years," he said. "Who knows what administration is going to be next? But if we do not demonstrate stewardship during that period of time, I dare say we are not going to like the subsequent time period."

Natural gas has reached a "moment of truth" amid the global transition to a lower carbon energy future, and controlling methane emissions is one of the steps the industry needs to take to be proactive in claiming its place as part of the climate solution, Guidry said.

As the world looks to continue cutting greenhouse gas emissions "we could easily say that we have the solution," he said, "so why is it as an industry we're still talking about building a natural gas bridge to renewables in the power sector and the golden age of gas, when it seems just a few years ago that seemed like a foregone conclusion? It hasn't happened exactly the way we'd hoped.

"...The debate over the future energy system has intensified" with some "arguing in favor of using other sources of energy instead of gas, and in many cases pragmatism has been replaced by idealism. This is where the moment of truth for gas comes in. Things have changed, and so we must ensure that we don't let this incredible opportunity pass us by."

Guidry identified four key steps for the industry to take. First, work with governments to encourage "smart policies and regulatory frameworks" to cut emissions, including accelerating coal-to-gas switching, promoting energy efficiency and adopting "widespread use of carbon capture storage" technology.

Second, the industry must further innovate and cut costs in order to ensure it remains competitive with cheap coal and renewables.

"As an industry, we're fully capable of tackling the cost reduction challenge without ever compromising safety and our environmental performance, and as we tackle the cost challenge we must work with our customers to ensure that structurally lower costs translate into structurally competitive pricing," Guidry said. "This will instill confidence in the market that a choice for gas is a resilient choice through all price cycles."

Third, the industry must manage its environmental footprint, "particularly methane emissions." Even factoring in methane emissions, burning natural gas still results in around 50% fewer equivalent emissions compared to coal, Guidry said.

"But we are at risk of undermining the credibility of the role of gas in the future energy mix if we allow methane to be emitted across that value chain," he said. "It is the responsibility of every company in the industry to do their part -- detect emissions, repair them and reduce venting. As an industry, we need to take control of this issue."

With those first three issues in order, the industry can then "confidently target demand growth" across the globe. "As an industry we can unlock far more demand by investing in import and distribution infrastructure, serving new customers and playing a key role in addressing energy poverty.”

Power demand is "only one piece of the pie," with opportunities for natural gas in other sectors of the global economy "where a significant portion” of energy-related emissions of carbon dioxide occur. “That's in transport, that's in building, and that's in heavy industries, particularly high-temperature industries -- cement, steel, and so on.

"Today electricity only meets around 20% of global demand. With a gradual transition toward a lower carbon energy system by 2050, electricity could take 30% of the market share...Ultimately we think electricity could take up around 50% of final consumption" near the end of the century, with global energy demand expected to double by that time.

"That's a big market to play for in terms of natural gas," he said.

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