Talanza Energy Consulting

January, 2021

Green deal: how environmental best practices allow for a greater ROI in methane emissions regulations

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In 2018, Mexico and Canada released specific regulations for methane emissions: the “Guidelines to Prevent and Control  Methane Emissions in the Hydrocarbons Sector” and the “Regulations Respecting Reduction in the Release of Methane and  Certain Volatile Organic Compounds (upstream Oil and Gas sector)”, respectively. Despite having been in effect for the  same amount of time, the implementation of the Canadian regulations is having traceable results, environmentally and  economically. In this pager, reference will be made to Canadian study cases to highlight the benefits and opportunities of  complying with the Mexican regulations, with economic and environmental benefits from adopting the best practices in  methane emissions reduction and paving the way to Net Zero goals for 2050.

MAKING THE RIGHT DECISION: CHOOSING THE CORRECT MEASUREMENT METHOD

Companies should be very careful when selecting the methodology for emissions quantification. In contrast to Canadian  regulations, where direct measurement is mandatory, Mexico’s regulations have two alternatives for quantifying gas  emissions by (1) direct measurement methods, such as Optical Gas Imaging (OGI) that uses infrared technology to  quantify the actual gas that is been leaked and allowing leak repairment, obtaining economic benefits and combating  methane emissions; and by (2) indirect methods or desktop studies, which use mathematical or engineering calculations,  software and emission factors.

Indirect methods might be appealing as the cost of the estimation may seem cheaper than the cost of direct measurement.  However, these indirect methods are typically designed for overestimation and are not a preferred approach as they leave  too much room for error, whereas direct measurement methods allow for precise leak detection and repair which  minimizes the environmental damage. On top, as the following study cases illustrate, direct measurement methods for  detection and repair bring a higher return on investment (ROI) when considered through a cost-benefit perspective.

CASE STUDY (ALBERTA)

WIN-WIN WITH THE GREEN DEAL

The lack of certainty deteriorates the risk profile for oil and gas companies. Hence facing compliance without Official Third Parties requires higher standards of compliance than normal. When technical and economic characteristics of  the projects allow, regulated companies shall perform direct measurement, bringing positive economic returns and, more  importantly, a positive effect on environment.

After two years of Mexican regulation publication, Mexican government is still struggling in reviewing compliance due to  the lack of Official Third Parties. The absence of Official Third Parties is not a reason for not complying as regulated  companies can instead obtain a favorable technical opinion from a national or international expert (according to Mexican  regulations). However, submitting technical documentation to the Agencia de Seguridad Industrial y Protección al Medio  Ambiente del Sector Hidrocarburos (ASEA) without the favorable opinion of an Official Third Party increases the odds of  authorizing activities without complying with the regulations and, eventually, receive requests for clarifications or  negligence accusations, increasing the risk of noncompliance. In the meantime, it is strongly recommended that regulated  parties document their methane emissions by using direct methods to avoid noncompliance risks, and for a better  environmental protection.

Note: Also about Methane , please look our One-pager of July 2020.

CLIMATE & CLEAN AIR COALITION

Methane has been responsible  for 40% of global warming since  the industrial revolution.

CH4 has an effect to global  warming of 84 times carbon  dioxide over a 20-year period.      

Fossil fuels represent 36% of  methane emissions.                                                                            

METHANE EMISSIONS IS THE LOW-HANGING FRUIT AGAINST  GLOBAL WARMING, BECAUSE:

1. Methane is a short -life gas as it remains in  the atmosphere for only 12 years. Therefore,  reducing methane emissions can have an impact  in a couple of decades. See EPA_GHG

2. Methane can be easily commercialized.  According to IEA, 40% of the world methane  fugitive emissions can be fixed with a positive  Net Present Value. See IEA_Abatement Cost

Talanza is honored to announce its new  partnership with Infratech Corporation,  through a new brand. This synergy has  broaden our international presence and  experience (Canada, United States, Mexico,  and Colombia) in regulatory matters, as well  as in planning and operating programs for  reducing fugitive emissions.

We proudly present Eminent, a firm that  emerges to combat global warming and  support the oil and gas industry to  prevent, control, and reduce methane  emissions, aiming at Net Zero goals for 2050.

Analysts

Marco Cota

Mr. Cota is the founder and CEO of TALANZA where he assists international energy companies in the design and implementation of tailor-suited strategies for their regulatory compliance adjusted to the applicable geopolitical context, considering current and upcoming regulations.