National Oil Companies Need Help to Cut Methane Emissions

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Reducing methane emissions from the oil and gas industry is one of the fastest ways to slow the pace of global warming, and national oil companies (NOCs) will be critical in this effort. At last year’s 28th United Nations Conference of the Parties (COP28) summit in Dubai, many NOCs made their first significant pledge to cut methane. But near the halfway mark to COP29, it is not clear that effective tools are being developed to help NOCs meet their commitments.

NOCs’ attention to methane and climate has lagged behind that of their publicly owned counterparts, in part because of their responsibilities as state-owned entities. Governments require these companies to deliver revenue, safeguard oil and gas resources, and protect energy security. Governments are often their sole shareholders, and even when NOCs have private shareholders, the state is in ultimate control.

Still, government climate targets, strong executive leadership at a handful of NOCs, and pressure from customers and commercial partners are producing stronger commitments. Last December, numerous NOCs signed the Oil and Gas Decarbonization Charter (OGDC), pledging to reach “near-zero” methane emissions and end routine flaring by 2030. Others have joined the Oil and Gas Methane Partnership 2.0 to transition toward measuring and reporting emissions across their operations.

NOCs also face new demands to cut methane, as rules in the United States, the European Union, and other countries will require better measurement, reporting, and verification of emissions. Emerging satellite and aerial survey technologies are spawning a data revolution that will shine a light on emissions by country and company, allowing gas buyers to differentiate between better and worse performers. And moves to incorporate methane performance standards into commercial agreements in the world’s largest import markets could be a major driver.

To help NOCs adjust to these changing external conditions, plenty of NGOs and foundations are pledging support. Indeed, NOCs are inundated with offers from industry groups, multilateral organizations, technology providers, and consultants. All have a role, but the real heavy lifting needs to come from industry itself given its technical expertise. Unfortunately, the array of industry-led associations—the Oil and Gas Climate Initiative, Methane Guiding Principles, the Oil and Gas Methane Partnership, and more—is confusing and inefficient. Some streamlining is in order.

First, the OGDC should focus on an implementation roadmap that will clearly show how its 50+ signatory companies will meet their 2030 commitments on methane and flaring. The plan needs to offer clear, actionable steps that each company is expected to take and timelines by which key milestones will be met. This is essential to provide civil society, investors, and importers confidence that the OGDC is not just an empty promise.

Second, the OGDC should integrate rather than recreate programs that are working well, such as a promising initiative called Advancing Global Methane Reduction. The program leverages joint-venture relationships—such as between BP in Azerbaijan or Woodside in Senegal—so companies with deep experience on methane provide technical support to commercial partners who are new to the game. Likewise, the OGDC should bring projects developed by technical experts at the International Oil & Gas Producers and Ipieca under its roof to provide seamless support to NOCs that are new to methane. This should be relatively easy since many of the same companies sit on the boards of these associations. These initiatives should be brought together to promote efficiency, effectiveness, and transparency.

Finally, dedicated finance for methane abatement is sorely needed. The World Bank’s new $255 million Global Flaring and Methane Reduction Partnership is an important step, but it is still tiny in terms of the total capital required for methane reductions. The World Bank should play to its strengths by funding technical resource needs and helping to move private capital off the sidelines by partnering with banks to de-risk and fund such projects. It could also help develop guardrails for new debt instruments to finance methane abatement projects.

Methane will again be high on the agenda at COP29 in Azerbaijan, but it would be a mistake to create a new set of pledges or to try to pass off activities that were already underway as something new. 2030 is bearing down fast, and there is no time to waste.

Ben Cahill is a senior fellow with the Energy Security and Climate Change Program at the Center for Strategic and International Studies in Washington, D.C.

This commentary is part of a project supported by Environmental Defense Fund on financial sector engagement with national oil companies.

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Ben Cahill
Senior Fellow, Energy Security and Climate Change Program