Flaring’s billion-tonne methane secret: An under-estimated opportunity for decarbonization and revenue generation in oil & gas

Key takeaway:

Flare capture presents a significant opportunity for oil & gas players to drive additional revenues and decarbonize operations.  However, we may well be significantly under-estimating the decarbonization potential due to invisible emissions from “methane slip”.

A thought-piece by Capterio. 800 words, reading time 3 minutes 55 seconds. Published at 1230 on October 4th 2019.

Capterio thinks a lot about the flaring of natural gas. Each year, 145 billion cubic metres (BCM) of gas is released into the atmosphere from gas flaring (its deliberate combustion), according to satellite data published by the World Bank’s Global Gas Flaring Reduction (GGFR) programme.  That’s $21 billion of revenue opportunity (at $4 per mmbtu) and 270 million tonnes of CO2 emissions per year.

Gas flaring leaves money on the table. Given that commercial technology solutions exist today, flaring should be minimal (except when it’s safety related). Gas is, after all, a valuable product with an important role to play in the energy transition, with lower greenhouse gas intensity than other fossil fuels and growing market share.

In addition to the attractive financial opportunity, the environmental benefits of flare capture are large. Yet, as we’ll argue here, they’re probably underestimated due to the omission of emissions of methane from incomplete combustion and venting.  The majority of flares also vent gas due to incomplete combustion resulting from poor aeration, the presence of fuel impurities, or the wind. Inefficient combustion (often of liquids) is often associated with characteristic black smoke (see figure 1). 

  Figure 1: Example flares from North Africa, as imaged in satellite data in Capterio’s flare opportunity screening tool, used to identify global opportunities for flare capture. Black smoke typically indicates a combination of inefficient combustion and significant liquids content of the gas. Read more about this tool in our detailed guide    here   Figure 1: Example flares from North Africa, as imaged in satellite data in Capterio’s flare opportunity screening tool, used to identify global opportunities for flare capture. Black smoke typically indicates a combination of inefficient combustion and significant liquids content of the gas. Read more about this tool in our detailed guide here

A comprehensive study of flares in the Bakken (USA) found a median combustion efficiency of 97% (equivalent to 3% “methane slip”), albeit with a significant skew towards lower combustion efficiencies (Gvakharia et al., 2017). Yet in many non-OECD countries (although there is very little hard data), combustion efficiencies are probably much lower.  Anecdotally, we know that some operators choose to vent over flaring, potentially to avoid easy detection from the current suite of satellites. 

At lower combustion efficiencies, the CO2-equivalent (CO2-e) emissions of flares are significantly higher, as methane (unburnt gas) is vented directly into the atmosphere. Methane has 84-86 times the Global Warming Potential (GWP) of CO2 (on a mass basis) on a 20-year timescale, according to the IPCC. So by tackling the inefficient combustion associated with flaring, the oil and gas industry could realise an even bigger environmental upside. Let’s take an example. 

An operation that delivers 10 million cubic feet per day of wet gas (i.e. containing a modest volume of gas condensate) to a flare with a 97% combustion efficiency would generate 0.24 million tonnes of CO2 emissions per year (see figure 2). But the same flare burning at, say 80% combustion efficiency (due to a poorly designed or maintained tip), has emissions ~6x higher, of 1.4 million tonnes per year. 

  Figure 2: Effect of combustion efficiency on CO2-equivalent emissions for an example flare of 10 million scf per day  Figure 2: Effect of combustion efficiency on CO2-equivalent emissions for an example flare of 10 million scf per day

Scaling this up to the global level, the environmental opportunity from tackling flaring and its associated venting gets material. Assuming a weighted-average global average combustion efficiency of, say, 90%, we calculate that 1.2 billion tonnes of CO2-equivalent are emitted. That’s ~4.4x the 270 million tonnes of CO2 emissions from a 100% efficient combustion scenario over a 20-time period (see figure 3).  And that’s a big unexpected abatement opportunity for the industry which makes an excellent target for “responsible” sustainability-led investment (see article).

  Figure 3: Total global CO2-equivalent emissions from flaring under different combustion efficiencies and different impact timelines  Figure 3: Total global CO2-equivalent emissions from flaring under different combustion efficiencies and different impact timelines

Methane abatement through flare capture is, therefore, a real opportunity for operators not only to monetize waste gas but also to dramatically decarbonize the industry. A comprehensive report by Columbia’s Center of Sustainable Investing outlines potential policy solutions. But independent of policy, there are multiple pathways for operators to act, using proven solutions: 

  1. Apply “quick fixes”, for example: 

    1. Improve combustion efficiency by using smokeless flare technologies (e.g. by improving airflow at the flare, utilizing flare monitoring systems);

    2. Reduce the volumes that reach the flare stack by improving operations by changing out suboptimal hardware (e.g. replacing leaking valves).

  2. Develop structural solutions to capture flared gas by creating valuable products, for example:

    1. Utilize the gas directly (e.g. for enhanced oil recovery (EOR), or for delivery to a local gas gathering system);

    2. Generate electricity from the gas (e.g. for local and regional consumption);

    3. Convert the gas to liquids for sale (e.g. NGL, CNG, LPG, GTL or LNG).

Capterio can help with flare monetisation.  We are wholly focussed on providing structural solutions that monetize waste gas and reduce greenhouse gas emissions. We bring financing, technology solutions, business models and capabilities to make the capture and reduction of flares (and associated vents and leaks) economic for all parties involved. We work with pioneering players in the oil and gas industry in collaborative partnerships. 

The authors thank colleagues from EDF, IEA, RMI, McKinsey, SYSTEMIQ and CCAC for inspirational discussions on this and related topics (although the opinions and analysis are our own).


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