Last Monday, Jo Peters, representing the Dutch oil and gas industry, and Eric Wiebes, Minister of Economic Affairs and Climate Policy, signed a covenant in which the Dutch offshore oil and gas industry pledged to halve methane emissions within two years through an ambitious reduction programme.
For its part, the government announced the launch of a study, to be conducted with industry, into the preconditions that will be needed to achieve further reductions in the longer term. For example, by switching the energy supply of the main offshore installations to sustainable electricity. At present, some of the gas produced is still used to meet the platforms’ own power needs. Electrification will also be necessary to keep the gas infrastructure available for future CO2 storage and the possible production, transport and storage of green hydrogen.
Jo Peters: “Whatever scenario you look at for the energy transition, the use of natural gas will be part of it for many years to come. So it makes sense to produce this gas in the Netherlands as far as possible. At present, the natural gas produced by the Dutch oil and gas industry from small fields accounts for about one-quarter of Dutch natural gas consumption. We think it is important to continue to produce gas as long as we have reserves, and as long as there is domestic demand for gas. This is, of course, subject to the condition that it is done in the most responsible way. In other words, in as climate-friendly a way as possible. For this reason, we are pleased to commit ourselves to this ambitious, but -according to our members – achievable objective and why, together with the government, we are investigating the essential conditions that need to be met in order to further reduce the impact of our activities.”
Minister Eric Wiebes: “I congratulate the industry on this ambitious methane reduction programme. On the road towards 2050, we will be scaling back gas consumption. Until that time – whether we like it or not – we will need natural gas. And gas produced in the Netherlands will be the preferred option. Dutch produced gas has a lower impact on the climate than imported natural gas, and it generates money rather than costing money. Through this programme, the industry is demonstrating in practice its recognition of its role in society and that it is taking concrete measures to further reduce the climate impact of oil and gas production.”
In the covenant, NOGEPA describes how measures taken following the signing of the Memorandum of Understanding on the implementation of environmental policy in the oil and gas industry have already led to a large reduction in emissions since 1990. The emission of methane throughout the entire oil and gas sector has decreased gradually by 47,900 tonnes (an 80% reduction) in the period 1990 to 2017. This is equivalent to an emission reduction of approximately 1.5 million tonnes of CO2. The covenant commits NOGEPA members to a further reduction in the next two years. The objective is to reduce overall emissions from existing offshore production platforms from 8,562 tonnes of methane per year in 2017 to 4,281 tonnes of methane per year by 31 December 2020 (a 50% reduction). This equates to 120,000 tonnes of CO2.
Best Available Techniques
Development of the reduction programme has been based on best available techniques (BAT). This was then followed by studies into the reduction potential and cost effectiveness of measures. The cost-effectiveness criterion developed in this way automatically ensures the implementation of measures that deliver the greatest reductions. The cost-effectiveness criterion is based on the CO2 price (the European Emission Trading System (ETS)) at the time of the inventory and selection of measures. The Dutch oil and gas sector is the first branch of industry to create an explicit link between the ETS and the emission of methane as a greenhouse gas.
A substantial increase in the European CO2 price during the life of this covenant may therefore trigger a review of the cost-effectiveness criterion for measures within the framework of this programme. Based on the established cost-effectiveness criterion, a reduction of 50% is feasible.
Electrification of the offshore production platforms looks to be an effective option to achieve further methane emission reductions, but this will require a connection to the offshore grid and the preconditions for this have yet to be developed. The electrification of platforms is also an important precondition for enabling CO2 transport to and storage in depleted oil and gas fields in the medium (until 2030) to long (until 2050) terms. The existing infrastructure can also be used for the offshore production, transport and storage of hydrogen. But here too, the platforms must first be connected to the electricity grid. Furthermore, the electrification of gas platforms directly results in a CO2 reduction of 0.5-1.0 megatons per year. The oil and gas sector can therefore make a substantial contribution to the objectives of the climate agreement and the development of the new energy system.
However, the sector will only be able to achieve electrification of the main production platforms once the economic and organisational conditions have been met. NOGEPA has identified the key conditions:
o Generic investment relief of 40%;
o Legislative framework to ensure the connection of offshore production platforms to the offshore energy grid;
o Established connection conditions, including tariffs;
o Compensation for uneconomic costs of electrification.
In the covenant, the parties agree to work together to study how further emission reductions can be achieved beyond 2020, and what will be needed to achieve this.