Natural Gas Leaks Ignored by Roughnecks Could Be Oil’s Future
Natural Gas Leaks Ignored by Roughnecks Could Be Oil’s Future
(Bloomberg) -- The energy guru that advised the U.S. Department of Defense on sustainability said drillers who are ignoring methane emissions are letting future profits seep away.
Amory Lovins, who’s been warning that greater energy efficiency risks stranding fossil fuel assets, said there’s emerging opportunity to capture and crack hydrogen molecules from methane, the main component in natural gas.
That greenhouse gas leaks out from wellheads and pipelines and is a more potent in terms of global warming than carbon dioxide. The concentration of methane in the Earth’s atmosphere has grown along with the expansion of the gas industry.
“It’s one of the few bright spots for hydrocarbons,” said Lovins, who wrote the 2004 book “Winning the Oil Endgame”. “They can monetize enough avoided methane emissions from flares and engineered vents to stabilize the whole global methane cycle.”
Methane has jumped onto the agenda of energy executives after U.S. Environmental Protection Agency late last month rolled back federal mandates that require oil and gas companies to identify and repair leaks. The decision drew criticism from some oil majors including Royal Dutch Shell Plc and Exxon Mobil Corp., which said they were just fine following earlier regulations.
Speaking in an interview outside of Vienna, where he was discussing the new economics of the energy industry to a group of policy makers, Lovins highlighted the outsized contribution to global warming that comes from methane.
The compound of hydrogen and carbon enters the atmosphere naturally from melting permafrost and swamps, as well as from livestock.
In the early days of the oil industry, it was a waste product shunned by drillers searching for liquid fossil fuels. They burned it off or just vented it into the atmosphere. Methane that escapes from pipelines, compressor stations and from oil wells has been blamed for as much as a quarter of the planet’s warming.
The costs of capturing methane can be prohibitive for hundreds of of thousands of existing U.S. Wells, according to the Independent Petroleum Association of America. Even though the EPA recognizes “methane is a valuable” product in itself, it wants the market rather than regulators to determine how it is captured, Administrator Andrew Wheeler said last month.
The remarks by Lovins highlight efforts to handle the gas more efficiently. One thought growing in prominence is building up a hydrogen industry, since that fuel emits no CO2 when burned.
Hydrogen molecules can be separated from methane using electrochemical processes, after which they could then be used to either store or generate energy. That technology hasn’t been widely adopted, however, since costs and slack demand for the product are prohibitive.
Lovins sees space for oil services companies including Schlumberger Ltd. and Halliburton Co. to offer services to smaller drillers struggling to contain methane leakage. Failing to control emissions could lead to “a loss of reputation that could prove fatal to the sector,” the scientist said.
The boom in hydraulic fracturing technology, or fracking, has driven a spike in methane, Lovins said, suggesting that regulators increase their scrutiny of the practice. And as that happens, wind and solar power may look like a better bet on economic terms alone, he said.
The Rocky Mountain Institute that he founded reported this week that 90% of proposed U.S. gas plants will become unprofitable in the next 15 years, potentially resulting in billions in stranded assets.
“Broadly, they are more at risk from market competition than even from climate regulation,” according to Lovins, who said that hydrogen markets for storage and heavy industry are developing. “The hydrogen in their hydrocarbons is worth more without the carbon.”
A new generation of remote sensors are being prepped for launch around the world that will make concealing methane emissions more difficult.
Satellites can detect invisible bands of the light spectrum, allowing for the identification of gases such as methane and carbon dioxide. Lovins said that information may reinforce shareholder pressure on companies to disclose and eliminate emissions.
To contact the reporter on this story: Jonathan Tirone in Vienna at jtirone@bloomberg.net
To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net, Lars Paulsson
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