From Oil and Gas Investor Editor-in-Chief: Committing to No Emitting

Presented by:

[Editor's note: A version of this story appears in the August 2021 issue of Oil and Gas Investor magazine. Subscribe to the magazine here.]

Reducing methane emissions in operations to as close to zero as possible is a mandate the oil and gas industry should pursue immediately and vigorously. In a world obsessed with any and every release of greenhouse gas molecules into the atmosphere, this is one area where the fossil fuel sector can clean up its act quite easily and gain favor with the investment community by doing so.

“Everything is being viewed through a climate lens now,” said Jack Belcher, principal with Cornerstone Government Affairs, speaking at Hart Energy’s Carbon Management Forum in July, which explored why and how producers should address their emissions.

Belcher predicted that responsibly sourced gas, or RSG, could become regulated, climate disclosures to access public capital might be soon required by the SEC, and Congress will inevitably enact a carbon offset market. All based on your (eventually mandated) emissions reporting.

Persefoni co-founder Jason Offman said, “Keep one thing in the forefront: License to operate.”

Ryan Keys, co-founder of privately held Permian player Triple Crown Resources LLC, takes these directives to heart. Speaking at the DUG Permian & Eagle Ford conference, Keys emphasized that eliminating methane emissions is not just for large independents and majors, but is imperative for private operators to master as well.

“In the U.S., 10% of greenhouse-gas emissions are methane emissions. If we can put a big dent in this—and there’s no reason we can’t—then oil and gas will be leading the way on the reduction in greenhouse gas emissions.”

Keys touted that Triple Crown leads the Midland Basin as the lowest volume operator in flaring intensity, based on Enverus data, an achievement resulting from company culture. “We made minimizing flaring a priority from the top down,” he said. “We view it as a business risk—because it is.”

Triple Crown connects every well to gathering infrastructure before producing it. It contracts with a back-up gas purchaser for when the primary purchaser can’t take all the gas. It’s at a reduced rate, but “it’s much better than flaring.”

But more alignment is needed between upstream and midstream, he said, “As in, we need to be held jointly accountable for flaring. That would greatly reduce the flaring volumes in the industry.”

Despite being atop the leaderboard, Keys criticizes data used by the EPA to derive emissions as antiquated and of limited comparison. “The auditors aren’t actually measuring anything. They’re just multiplying emission factors by the type and amount of certain types of equipment we have or don’t have. And this needs to change if our industry is going to make a lot of progress here.”

To actually know emissions, he said, the industry has to measure them like it measures wellhead rates and pressures every day using SCADA. “You have to be data driven about this.”

To get a clearer picture of its emissions, Triple Crown hired Kairos Aerospace to fly over its facilities to monitor for leaks. With relatively new facilities in place, “we were confident our leaks would be negligible or nothing. Not even close.”

The survey revealed 1,300 Mcf/d of errant emissions, or about 4% of total gas production, primarily from newly installed tank batteries. “If this is happening to us, it’s likely happening to everyone else in the Permian.”

Surprisingly, Triple Crown discovered that fixing methane leaks was its most economic project as an oil and gas company. “If anyone has noticed recently, wet gas is worth a lot of money.”

The company spent $24,000 on the survey and repairs. The value of the methane captured was $139,000—in the first month— and $400,000 after four months. “That’s a 20x ROI on captured methane in four months. That project paid out in five days. If we put methane capture on a level playing field with our other projects, this is our best project.”

The company is offering a white paper on how it accomplished this. “Our goal is to turn every EHS department at every oil and gas company into a profit center.”

Further, any new investments in the private equity space will prioritize emissions reduction, he said.

“This is more of a carrot than a stick. If we position ourselves as leaders in Scope 1 emissions, that positions us to be recipients of the limited amount of private equity capital left in the space. If others are interested in participating in that, then they’re going to have to prove emissions as well.”

Eventually, he said, the cost of capital is going to be directly or indirectly influenced by the industry’s stewardship on these metrics.

“If we’re really trying to reduce greenhouse gas emissions, then it starts with us,” said Keys. “We have to make a choice to prioritize this, and this will allow us to finally start contributing to or even controlling the narrative.”