Last year, $15 billion worth of natural gas literally went up in smoke as operators around the world flared 4% of global gas production (enough to power all of sub-Saharan Africa).¹ While flaring is one of many sources of GHG emissions from upstream oil & gas operations (tanks, pneumatic valves, equipment leaks, etc.), its public visibility gives it additional weight in the eyes of investors. On October 21^st the Environmental Defense Fund (EDF) released a 44-page report titled "The Burning Question: How to Fix Flaring" to educate investors and the public so they can ask the right questions to identify E&P leaders and laggards on the topic of flaring. Here we provide a summary of the report highlights and add additional insights on innovative technologies not mentioned by the EDF.

Scope of the Flaring Challenge

Total volumes of flared gas globally have decreased only slightly since the early 2000s and reached 142 billion cubic meters (~5 trillion cubic feet) in 2020. These emissions contribute to global warming and introduce nitrogen oxides (NOx), volatile organic compounds (VOCs), and particulate matter detrimental to the health of local communities.

Source: The World Bank: Global Gas Flaring Tracker

To help address the global flaring challenge, several entities have emerged to provide reporting and reduction commitment guidelines. Key entities include:

• Zero Routine Flaring by 2030 Initiative (ZRF30): Launched in 2015 by the World Bank and United Nations Environmental Program with endorsements from 34 governments, 44 companies, and 15 development institutions
• Oil and Gas Methane Partnership (OGMP) 2.0: Co-developed by the United Nations Environmental Programme, Environmental Defense Fund and the European Commission to set the “gold standard” for methane reporting including flaring
• The World Bank’s Global Gas Flaring Reduction Partnership (GGFR): Public-private partnership that works to identify technical and regulatory solutions to flaring

Current State of Commitments and Disclosures

Most commitments today focus on eliminating routine flaring (flaring due to lack of offtake infrastructure) by 2030 and call for operators to disclose three key metrics:
1) Absolute flaring volume (gross operated and net equity)
2) Routine flaring volume
3) Flaring intensity (percent of gas flared vs produced)

The industry's adoption of these flaring reduction and disclosure practices was investigated by the EDF through a comparison of 20 large E&Ps.

Source: EDF - The Burning Question: How to Fix Flaring

Most companies have committed to zero routine flaring by 2030, and some have pledged an even more ambitious target of zero routine flaring by 2025. Clear plans on how these targets will be achieved, however, are not available for all operators. Additionally, many operators disclose their total flared volumes but not flaring intensity or flaring intensity targets.

Leaders and Laggards

To differentiate E&Ps on their flaring practices and plans, the EDF evaluated flaring intensities using satellite data sourced from Flaring Monitor and Wood Mackenzie. The data reveals a wide range of performance within groups, especially NOCs, and shows major E&Ps to have the lowest flaring intensities.

Source: EDF - The Burning Question: How to Fix Flaring

Based on their flaring intensity, the EDF identified the following leaders and laggards:

The EDF also called for all operators to adopt four commitments on flaring:
1) Join the World Bank’s Zero Routine Flaring By 2030 initiative, or make an equivalent commitment, and commit to this by 2025 for operations in the US Permian Basin
2) Adopt a target for overall flaring intensity
3) Adopt a zero tolerance policy for unlit flares, which are major sources of methane pollution
4) Advocate for government policies to reduce flaring and minimize flare malfunctions

Flaring Reduction Solutions

The most straightforward method of reducing flared volumes is through better coordination of upstream and midstream development. The Permian has already seen significant reductions in flaring intensity as new pipeline capacity has caught up to drilling and completions activities.

Outside of better alignment of production and takeaway capacity, several options were posed by the EDF for reducing flared volumes:

• Gas re-injection for pressure support or enhanced oil recovery
• Conversion into compressed natural gas (CNG) after the removal of water, sulfur, and CO₂
• Conversion into liquified natural gas (LNG) via a micro LNG plant (which typically cost $20MM in capital expenditure)
• Use in gas turbines & reciprocating engines for on-site power generation or sale back to the grid

Darcy Partners has evaluated dozens of vendors in these spaces as well as other solutions including:

• Digital offtake (onsite compute power generation)
• Enclosed combustion (making sure methane is fully combusted)
• Better monitoring (detecting if equipment such as flare pilot lights are working properly)

Darcy members can view unblurred framework here

Reports such as this by the EDF are indicative of broader trends in the upstream oil and gas industry. Emissions detection technologies such as satellites and sensor-mounted aircraft are scaling and leading to increased transparency and emissions quantification at the operator level. This enables investors and the public to be more informed and differentiate operators based on their performance towards achieving stated ESG goals. The positive news for E&P operators is that emissions reduction via flaring or other sources is fundamentally an engineering challenge and one within their control. Those E&Ps that can best leverage innovative solutions to detect and mitigate emissions can capture gas for sale and improve revenues while also improving their public image and license to operate, a clear win-win opportunity.