As we launch the third edition of our annual Voluntary Initiatives report, I am filled at once with wonder and gratitude. Wonder at how far our industry has come in only three years, in terms of our collective emissions knowledge, competencies, and sustained commitment to progress. Gratitude for those who have done the work to get us here – including industry, regulators, academics, non-profits, service providers, innovators, and educators. Many of the visionaries pushing our industry forward are the same individuals and organizations who have made this report possible. We extend our sincere thanks to our sponsors for funding this report, to the administering organizations for their cooperation and contributions, to our colleagues and mentors for their guidance, and to the Highwood team – especially those who have worked tirelessly for months to produce this report. We look forward to another year of hard work – alongside all of you – in our mission to deliver cleaner and more affordable energy.
Global demand for energy continues to increase, alongside energy transition pressure. With a rising global demand for sustainable and affordable energy, operators in the oil and gas industry are looking for strategies to balance or reduce the greenhouse gas (GHG) emissions footprint from their operations. As a large global emitter, the oil and gas industry is expected to contribute to GHG emission reductions to meet the goals set by the 2015 Paris Agreement.
Energy transition is often misunderstood. Throughout history, transitions have occurred due to technological developments, or scarcity of existing resources. Today’s energy transition factors in environmental concerns and the need to mitigate climate change. However, transition is not about a hard-stop on existing energy sources, but rather a collaborative approach to lowering the carbon footprint of existing supply in conjunction with the development of new low-carbon solutions.
The energy industry will be part of the solution. Minimizing and managing emissions from oil and gas production is not only becoming a regulatory requirement, but also a benchmark for stakeholders to evaluate and grant social license. By taking a proactive approach to emissions management and going beyond the minimum regulatory requirements, energy companies can differentiate themselves to Environmental, Social, and Governance (ESG) conscious stakeholders, profit from reduced leakage, as well as benefit from premiums for certified low-carbon products.
Voluntary Initiatives are an essential part of the solution. Early in 2021, our team at Highwood Emissions Management (Highwood) observed a rapidly growing ecosystem of voluntary initiatives available to the energy industry. Our clients expressed increasing confusion as they attempted to navigate a new and expanding network of programs, asking questions like “Which one is best?” and “What is the benefit to my organization?”.
Our first report in 2021 broke new ground. It brought structure and guidance to the rapidly emerging voluntary initiatives landscape. We identified 20 distinct voluntary initiatives and categorized them as certifications, guidelines, commitments, or ESG ratings. We also introduced disclosure levels and offered recommendations for how organizations could approach and adopt voluntary initiatives. These definitions and classifications are rapidly becoming standardized terms in the emissions management space.
We followed with our 2022 report, expanding our coverage to 24 voluntary initiatives available to the energy industry, including 8 new initiatives. The second edition leveraged questionnaires to collect detailed information from administering organizations. Using this data, we expanded the scope to include the entire supply chain, allowing participation for gathering, boosting, processing, transmission, and LNG operations. We also introduced a series of feature articles to help operators evaluate their voluntary options, with topics such as The Role of Measurement, Selecting the Right Initiative for You, Leaders in Differentiated Gas, and more.
This 2023 third edition updates existing and new programs, totalling 24 voluntary initiatives now available to the energy industry across the supply chain. New developments are highlighted as well as trends towards the use of shared methodologies and protocols among initiatives and regulatory bodies.
In 2022, there was a surge of adoption in most certification initiatives.
Most of these initiatives currently have a slow but steady rate of continued growth. OGMP 2.0 and MiQ are outliers, with 86% and 29% increase in number of listed participants, respectively.
Contrary to our expectations, we have found that less rigorous initiatives did not correlate to a higher uptake. Based on the data gathered, initiatives that rated themselves as moderate in the effort scale had the highest increase in uptake in 2023. This indicates that companies are willing to concentrate their effort on initiatives that have established their interoperability and value add, be it in terms of financial, operational and/or reputational value.
We also observed that most initiatives require or award higher ratings to companies employing direct emissions measurements. An Eye on Methane: International Methane Emissions Observatory 2022 Report noted direct measurement numbers were on average, 60% higher than industry estimation for United States energy production.
01. Participation is growing and seen across the world, especially for OGMP 2.0.
02. Most initiatives have acknowledged their complementary criteria with other programs, increasing interoperability and agility for participants.
03. Some regulatory bodies have started to structure their disclosure requirements around voluntary initiatives to streamline and maximize interoperability.
05. Participating companies are facing heightened public scrutiny regarding their environmental claims, prompting administering organizations to improve on verifiability and transparency.
06. Newer initiatives are developing guidance for specific industries and segments.
While the cost of direct measurement is higher, measurement-informed inventories tend to better represent individual company inventories. Companies using direct measurement have more representative baselines giving higher credibility to their overall reduction results.
We identify six key knowledge gaps that may prevent broader industry uptake. Addressing these gaps and aligning protocols will improve transparency, credibility, and the value of voluntary initiatives.
In addition, we continue to address the knowledge gaps identified in the 2022 report. In particular, GTI Energy’s Veritas initiative has addressed the need for better data and more transparent reporting by creating methane measurement and reconciliation protocols. Amid continuous improvement, clarification, and recognition, we are optimistic that voluntary initiatives will become increasingly credible, trusted, and adopted within the oil and gas.
01. Harmonization between regulations and voluntary initiatives – Will initiatives adopt regulatory disclosure requirements, or the other way around? The alignment in their requirements will decrease the barriers in adoption of voluntary initiatives.
02. Chicken and egg conundrum: A major barrier in the adoption of certification and commitment initiatives has been the uncertainty around the benefits versus costs. However, a wide adoption of the initiative must happen to decrease this uncertainty.
03. How can administering organizations encourage transparency and accountability without dissuading companies from engaging in the programs?
04. What is the level of effort required and best approach for a credible measurement-informed inventory?
05. Encouraging companies to delve deeper into understanding their complete emissions profile through direct measurement remains to be a significant challenge.
06. There is no centralized and publicly accessible database that collects, aggregates, and analyzes information from the different initiatives. Is there a meta-initiative that can collect, aggregate, and disseminate reported data?
GHG’s are gases that trap heat in the atmosphere, and include carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), and fluorinated gases. Carbon dioxide and methane account for approximately 80% and 12% of total GHG’s respectively.
CO2 is produced by the combustion of fossil fuels or, in other words, the use of fossil fuels to create energy. Methane is produced during fossil fuel extraction (coal, gas, and oil), agricultural practices, land use, and by the decay of organic landfill waste.
Year over year methane emissions from energy combustion, leaks, and venting grew by 3% and 2% in 2021 and 2022 respectively1. Methane emissions are both harmful, and wasteful. The International Energy Agency (IEA) estimates that:
“More than 260 billion cubic metres (bcm) of natural gas is wasted through flaring and methane leaks globally today. It is unlikely that all of this can be avoided, but with the right policies and on-the-ground implementation on both flaring and methane emissions, an estimated 200 bcm of additional gas could be brought to markets.1 ”
In 2022 the average Henry Hub gas price was US$ 6.40/MMBTU. Using an average heat content of 1,037 BTU/cf, and 1 cf to 0.02833 m3, 1 bcm of natural gas is equal to 36,600,000 MMBTU. An additional 200 bcm could potentially translate to US$ 4.6 trillion in additional revenue.