November 2020 Methane Emissions from Natural Gas and LNG Imports: an increasingly urgent issue for the future of gas in Europe OIES PAPER: NG 165 Jonathan Stern, Distinguished Research Fellow, OIES The contents of this paper are the author’s sole responsibility. They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its members. Copyright © 2020 Oxford Institute for Energy Studies (Registered Charity, No. 286084) This publication may be reproduced in part for educational or non-profit purposes without special permission from the copyright holder, provided acknowledgment of the source is made. No use of this publication may be made for resale or for any other commercial purpose whatsoever without prior permission in writing from the Oxford Institute for Energy Studies. ISBN 978-1-78467-170-9 i Acknowledgements Colleagues at the OIES have been kind enough to read through the text and make helpful suggestions including: Alex Barnes, Mike Fulwood, James Henderson, Anouk Honoré, Martin Lambert, David Ledesma, Simon Pirani and Katja Yafimava. Special thanks are due to Marshall Hall who spent a great deal of his time discussing the subject with me, alerting me to many sources that I otherwise might have missed, filling in gaps in the text, and helping greatly by calculating methane intensity values. Outside the OIES I am grateful to: Tomas Bredariol, Christian Lelong, Christophe McGlade, Antoine Rostand and Peter Zeniewski for providing me with helpful comments and sources for many aspects of this extremely difficult subject. Thanks for John Elkins for his editorial suggestions and Kate Teasdale who did everything else with her customary efficiency I am solely responsible for all and any errors and omissions which remain, and all opinions and interpretations. ii Preface The Natural Gas Programme at OIES has been now been publishing research on the challenges of decarbonisation for the gas industry for more than four years, and the topic is becoming ever more relevant. In particular, the EU continues to lead the way with its target for net zero emissions by 2050 and its creation of strategies to encourage all sectors in the economy to implement radical action to achieve this objective. From a gas industry perspective, the latest strategic document concerns methane emissions, and its implications, as discussed by Jonathan Stern in this paper, are potentially very significant. As Stern highlights at the very start of the paper, the subject is a very challenging one not only because the data are complex but also because their availability varies widely by country and the interpretation of them is not at all consistent. Nevertheless, the message to the gas industry (and indeed to other suppliers of fossil energy) is very simple and clear – establish a methodology to demonstrate the methane emissions in your value chain and show how you are managing them or we (the EU) will apply a default value and charge you accordingly. Essentially, the EU is forcing the gas industry to confront an issue that has dogged it for some time, namely that although it claims to produce the “cleanest” fossil fuel this assertion is undermined by the fact that it has failed to fully address the well-known, but as yet less than accurately quantified, problem of methane emissions across the gas value chain. In this important paper Stern outlines the key issues that are now being debated and provides his thoughts on the reaction that is now required from all actors in the gas sector. He provides an overview of the key themes, discusses the issues surrounding the measurement, reporting and verification of methane emissions, looks at the specific emissions associated with the key exporters of gas to Europe and then concludes with the key implications of the new EU Methane Strategy. With this report, he continues his recent work on the challenges being faced by the gas industry in Europe, but importantly he also underlines that this is likely to become a global theme as goals for carbon neutrality are now appearing in a number of non-EU countries, especially in Asia. As a result, this issue cannot be dismissed as a region-specific concern, but should be viewed as another instance of the EU acting as a catalyst for the gas sector to prepare itself for a global energy economy within which decarbonisation is becoming an ever more important theme. As such, we hope that readers find this paper both informative and interesting but also a significant contribution to this increasingly vital debate. James Henderson Director, Natural Gas Programme Oxford Institute for Energy Studies iii Contents Acknowledgements .............................................................................................................................. ii Preface .................................................................................................................................................. iii Contents ................................................................................................................................................ iv Figures ................................................................................................................................................... v Executive Summary .............................................................................................................................. v Introduction: accurate measurement of methane emissions from European imports: why the urgency? ................................................................................................................................................ 1 The importance and impact of methane emissions ............................................................................ 2 Interpretations of the global warming potential (GWP) of methane .................................................... 3 2. Measuring Methane Emissions: methodologies and data sources ............................................. 4 Top down and bottom up measurement methods .............................................................................. 5 UNFCCC/IPCC data on methane emissions ...................................................................................... 6 The IPCC Tiers of Measurement ........................................................................................................ 9 UNFCCC data from national inventories ............................................................................................. 9 The International Energy Agency’s Methane Tracker ....................................................................... 10 NGO and Academic Studies of Methane Emissions ........................................................................ 12 Satellite Data and `Super-Emitters’ ................................................................................................... 13 Gas Flaring ........................................................................................................................................ 15 Measurement, Reporting and Verification Initiatives and Studies .................................................... 16 Fuel switching methodologies and calculations ................................................................................ 17 3. Calculating emissions from countries which export gas and LNG to the EU .......................... 18 Emissions from domestic EU production compared with imports ..................................................... 19 Case studies of methane intensity: Russia and the UK .................................................................... 21 The Emergence of `Carbon-Neutral’ LNG and a Contractual MRV Methodology for LNG Cargos in Asia ................................................................................................................................................... 23 4. The EU Methane Strategy ............................................................................................................... 25 Legislative and regulatory requirements ........................................................................................... 26 The international dimension of the Strategy ..................................................................................... 26 Issues for natural gas exporters ........................................................................................................ 27 5. Summary and Conclusions ............................................................................................................ 30 BIBLIOGRAPHY ................................................................................................................................... 32 APPENDIX 1. Sources of Methane Emissions from the Gas Value Chain .................................... 37 APPENDIX 2: IPCC Definitions of Tiers ............................................................................................ 38 APPENDIX 3. Methane Emission and Uncertainty Factors for the Natural Gas Value Chain - Tier 1 ............................................................................................................................................................ 39 APPENDIX 4. Methane Emission and Uncertainty Factors for the Oil Supply Chain - Tier 1 ..... 42 APPENDIX 5: Data on Methane Emissions from Underground, Surface and Abandoned Coal Mines ...................................................................................................................................................