S&P Global Commodity Insights: Permian Basin Methane Emissions Dropping 26% despite 23B Daily Gas Production

The Permian Basin of west Texas and eastern New Mexico is the biggest oil and gas producing field in the U.S., but recent innovations in energy efficiency are helping to reduce its carbon footprint, according to a new analysis by S&P Global Commodity Insights.

The S&P study indicates that annual methane emissions caused due to oil and gas production operations in the Permian Basin decreased 26 percent by more than 34 billion cubic feet (bcf) in 2023 as compared to 2022, equivalent to 18.5 million tons of CO2 emissions avoided by every electric vehicle on the road in the U.S. in 2023.

The findings of the latest analysis for Permian upstream methane, produced in partnership with methane management firm Insight M, are based on high frequency observation data including nearly 700 high-resolution aerial surveys covering 88 percent of the basin's active wells to provide accurate, basin-wide estimate of methane emissions.

The size of the 2023 reduction in methane emissions was:

• More than the total 2023 driving emissions avoided by every EV ever sold in the U.S., even if all the vehicles were powered 100 percent by zero-carbon electricity.
• Roughly the same as the total GHG emission from all sources for the state of Hawaii during the same period.

CO2 Capture and Storage in the Permian: Read more at EnergyTech

The analysis revealed that the decline occurred even though the total oil and gas production in the Permian increased. As a result, the basin's methane intensity (ratio of total methane emissions to total output) registered a decline of 30 percent.

The analysis points the emissions decline to ongoing improvements in equipment as well as increasing deployment of new technologies, from AI-driven analysis of operational data to on-the-ground sensors, aircraft overflights and satellites, making it possible to detect leaks with greater speed and accuracy.

"Improvements and increased accessibility of remote sensing technologies is providing a better understanding of U.S. methane emissions, and more actionable information,” said Kevin Birn, Head of the Center for Emissions Excellence, S&P Global Commodity Insights. "Leaks that previously might have persisted for weeks or months can now be addressed in a matter of days."

Additional findings from the analysis:

• Methane emissions measured as a percentage of the basin's total natural gas output fell 33 percent. Methane emissions constituted 1.36 percent of the region's total 2023 production of over 23 bcf per day, roughly half of all U.S. gas production.
• In terms of total energy (barrel of oil equivalent) produced, notable because Permian production is heavily oil-focused, with associated gas occurring as part of the process, the 2023 methane intensity for the Permian was 0.63 percent of total production.
• In terms of lost economic value (i.e. had the gas been captured and sold), 2023 methane emissions accounted for 0.12 percent of upstream revenues, a 70 percent drop from 2022 as gas prices fell relative to oil. While this revenue loss is minor in the context of total revenues, given ongoing improvements in technology fixing leaks is expected to deliver positive returns.

"For oil and gas operators, evaluating spending on methane emissions reduction is a dynamic exercise as technologies and data steadily improve, regulations change, and mitigation progress continues," said Raoul LeBlanc, Vice President, Global Upstream, S&P Global Commodity Insights. "Obviously, the economics tighten as the leaks get smaller and harder-to-find. However, detecting and mitigating fugitive methane usually turns a profit simply from the sale of the recaptured gas, even in a lower natural gas price environment."

The U.S. Energy Information Administration has estimated that the average of more than 400 new wells drilled within the Permian over the past five years has almost equalled those in the rest of the nation combined. Pre-pandemic drilling wells topped 600 in 2019 and then dropped dramatically as the sweep of COVID-19 curtailed energy consumption.