BP

US CO2 and Methane Intensity by Basin

The CO2 intensity of oil and gas production is tabulated for 425 distinct company positions across 12 distinct US onshore basins in this data-file. Using the data, we can break down the upstream CO2 intensity (in kg/boe), methane leakage rates (%) and flaring intensity (mcf/boe), by company, by basin and across the US Lower 48.

In this database, we have aggregated and cleaned up 957 MB of data, disclosed by the operators of 425 large upstream oil and gas acreage positions. The data are reported every year to the US EPA, and made publicly available via the EPA FLIGHT tool.

The database covers 70% of the US oil and gas industry from 2021, including 8.8Mbpd of oil, 80bcfd of gas, 22Mboed of total production, 430,000 producing wells, 800,000 pneumatic devices and 60,000 flares. All of this is disaggregated by acreage positions, by operator and by basin. It is a treasure trove for energy and ESG analysts.

CO2 intensity. The mean average upstream oil and gas operation in 2021 emitted 10kg/boe of CO2e. Across the entire data-set, the lower quartile is below 3kg/boe. The upper quartile is above 13kg/boe. The upper decile is above 20kg/boe. And the upper percentile is above 70kg/boe. There is very heavy skew here (chart below).

The main reasons are methane leaks and flaring. The mean average asset in our sample has a methane leakage rate of 0.21%, and a flaring intensity of 0.03 mcf/bbl. There is a growing controversy over methane slip in flaring, which also means these emissions may be higher than reported. Flaring intensity by basin is charted below.

US CO2 intensity has been improving since 2018. CO2 intensity per basin has fallen by 17% over the past three years, while methane leakage rates have fallen by 22%. Activity has clearly stepped up to mitigate methane leaks.

(You can also see in the data-file who has the most work still to do in reducing future methane leaks. For example, one large E&P surprised us, as it has been vocal over its industry-leading CO2 credentials, yet it still has over 1,000 high bleed pneumatic devices across its Permian portfolio, which is about 10% of all the high-bleed pneumatics left in the Lower 48, and each device leaks 4 tons of methane per year!).

Most interesting is to rank the best companies in each basin, using the granular data, to identify leaders and laggards (chart below). A general observation is that larger, listed producers tend to have lower CO2 intensity, fewer methane leaks and lower flaring intensity than small private companies. Half-a-dozen large listed companies stand out, with exceptionally low CO2 intensities. Please consult the data-file for cost curves (like the one below).

Methane leaks and flaring intensity can also be disaggregated by company within each basin. For example, the chart below shows some large Permian producers effectively reporting zero flaring, while others are flaring off over 0.1 mcf/bbl.

All of the underlying data is also aggregated in a useful summary format, across the 425 different acreage positions reporting in to EPA FLIGHT, in case you want to compare different operators on a particularly granular basis.

US Refinery Database: CO2 intensity by facility?

This US refinery database covers 125 US refining facilities, with an average capacity of 150kbpd, and an average CO2 intensity of 33 kg/bbl. Upper quartile performers emitted less than 20 kg/bbl, while lower quartile performers emitted over 40 kg/bbl. The goal of this refinery database is to disaggregate US refining CO2 intensity by company and by facility.

Every year, the c125 core refineries in the US, with c18Mbpd of throughput capacity report granular emissions data to the US EPA. The individual disclosures are something of a minefield, and annoyingly lagged. But this refinery database is our best attempt to tabulate them, clean the data and draw meaningful conclusions.

Some of the larger companies assessed in the data-file include Aramco, BP, Chevron, Citgo, Delek, ExxonMobil, Koch, HF Sinclair, Marathon, Phillips66, PBF, Shell and Valero.

The average US refinery emits 33kg of direct CO2 per barrel of throughputs, we estimate, with a 10x range running from sub-10 kg/bbl to around 100 kg/bbl (chart below).

Breakdown of direct US refinery emissions? The 33 kg/bbl average CO2 intensity of US refineries comprises 20 kg/bbl of stationary combustion, 8 kg/bbl of other refining processes, 3 kg/bbl of on-site hydrogen generation, 1 kg/bbl of cogeneration, 0.2 kg/bbl associated with methane leaks.

Some care is needed in interpreting the data. Refineries that are more complex, make cleaner fuels, make their own hydrogen (rather than buying merchant hydrogen) and also make petrochemicals are clearly going to have higher CO2 intensities than simple topping refineries. There is a 50% correlation between different refineries’ CO2 intensity (in kg/bbl) and their Nelson Complexity Index.

Correlation between the CO2 intensity of US refiners and their Nelson Complexity Index

Which refiners make their own hydrogen versus purchasing merchant hydrogen from industrial gas companies? This question matters, as hydrogen value chains come into focus. Those who control the Steam Methane Reformers may be readily able to capture CO2 in order to earn $85/ton cash incentives under the IRA’s reformed 45Q program, as discussed in our recent research note into SMRs vs ATRs. One SuperMajor and two pure play refiners stand out as major hydrogen producers, each generating 250-300kTpa of H2.

How has the CO2 intensity of US refineries changed over the past 3-years? The overall CO2 intensity is unchanged. However, some of the most improved refineries have lowered their CO2 intensities by 2-10 kg/bbl (chart below). Conversely, some Majors have seen their CO2 intensities rise by 2-7 kg/bbl.

For further context and ideas, we have also published summaries of our key conclusions into downstream, vehicles and long-term oil demand. All of our hydrocarbon research is summarized here.

The full refinery database contains a granular breakdown, facility-by-facility, showing each refinery, its owner, its capacity, throughput, utilisation rate and CO2 emissions across six categories: combustion, refining, hydrogen, CoGen, methane emissions and NOx (chart below). The data-file was last updated in 2023 and covers the full US refinery landscape in 2018, 2019 and 2021, going facility by facility, and operator by operator.

Exploration capex: long-term spending from Oil Majors?

This data-file tabulates the Oil Majors’ exploration capex from the mid-1990s, in headline terms (in billions of dollars) and in per-barrel terms (in $/boe of production). Exploration spending quadrupled from $1/boe in 1995-2005 to $4/boe in 2005-19, and has since collapsed like a warm Easter Egg. One cannot help wondering about another cycle?

The peer group comprises ExxonMobil, Chevron, BP, Shell and TOTAL, which comprise c10% of the world’s oil production and 12% of the world’s gas production. As a good rule of thumb, this group can be thought of as c10% of global production.

This peer group quadrupled its exploration expenditures, from $5bn pa spent on exploration in 1995-2005 to an average of $20bn pa on exploration at the peak of the 30-year oil and gas cycle in 2010-2015. Exploration spend ramped from $1/boe to $4/boe over this timeframe. It has since fallen back to $1/boe, or around $1bn per company pa in 2022.

The US has always been the most favored destination, attracting c25% of all exploration investment, both offshore (e.g., Gulf of Mexico) and increasingly for short-cycle shale. During the last oil and gas cycle, the largest increases in exploration investment occurred in Africa, other Americas, Australasia; and to a lesser extent in Europe and the Middle East.

One possible scenario for the future is that this peer group will continue to limit its exploration expenditures to the bare minimum, below $1bn per company per year, or below $1/boe of production; under the watchwords of “capital discipline”, “value over volume” and “energy transition”.

However, it is somewhat terrifying to consider that the industry needed to spend an average of $2.5/boe on exploration from 2005-2019 in order to hold its organic production “flattish”.

Under-investment across the entire industry may foreshadow a sustained shortage of energy, especially if 50% lower-carbon gas is intended to replace coal as part of the energy transition, per our roadmap to net zero, or more pressingly as Europe faces sustained gas shortages. Hence one cannot help wondering if industry-wide exploration capex in the 2020s and 2030s is going to resemble the 2000s and 2010s?

This data-files aggregates the Oil Majors’ exploration capex, across ExxonMobil, Chevron, BP, Shell and TOTAL disclosures, apples-to-apples, back to 1995.

Methane emissions from pneumatic devices: by operator, by basin?

Methane emissions from pneumatic devices across the US onshore oil and gas industry comprise 50% of all US upstream methane leaks and 15% of all upstream CO2. This data-file aggregates data on 800,000 pneumatic devices, from 300 acreage positions, of 200 onshore producers, in 12 US basins.

Pneumatic devices are valves and pumps that are actuated by pressurized natural gas, widely used in the oil and gas industry, and numbering around 800,000 in the US in 2021, across 22Mboed of production that we are tracking, acreage position by acreage position, based on EPA disclosures.

The problem with pneumatic devices is that they leak methane, a greenhouse gas, emitting an average of 1 ton of methane per device per year, explaining 20MTpa of US CO2e emissions, equivalent to 2.5 kg/boe of Scope 1 CO2 emissions, or around half of the CO2 attributed to methane leaks in the US upstream oil and gas industry.

So over time, we expect bleeding pneumatic devices to be phased out in the US, especially ‘high bleed’ pneumatic devices, which emit around 5 tons of methane per device per year, as part of the industry’s growing efforts to mitigate methane. (This note also covers companies in the supply chain to help mitigate methane emissions from pneumatic devices, including a switch to electrically actuated devices, example here).

We have been tracking methane emissions from pneumatic devices in the US oilfield since 2018, although the latest data from 2021 do not show much improvement in aggregate (chart above).

The average well that is in operation in the US oilfield is associated with 1.4 bleeding pneumatic devices, although it is highest in basins that produce similar quantities of both oil and gas, at 2-3 pneumatic devices per well in the MidCon, Anadarko basin and Eagle Ford, while it is lowest in the Marcellus and Utica, at 0.75 pneumatic devices per well, as pure-play gas producers primarily aim to monetize not leak their gas.

Methodology. Note that in the chart above we have adjusted the data into ‘intermediate equivalents’. For example, the average low-bleed pneumatic device emits 9x less methane than the average intermediate-bleed device, and so we consider 9 low-bleed devices “equivalent” to one intermediate bleed device.

Pneumatic devices per well also vary vastly by operator. The best operators have well below 0.5 pneumatic devices per well, while some have shifted almost entirely to electrically actuated devices that use no methane.

Leaders include Pioneer, EOG, Diamondback, with no high-bleed pneumatic devices, and very few intermediate-bleed pneumatic devices across their portfolios.

On the other side of the spectrum are operators with 2-7 bleeding pneumatic devices per well. We have wondered in the past whether regulations are going to tighten and clamp down upon bleeding pneumatic devices, especially high bleed pneumatic devices, and create large capex burdens on companies with methane-leaking assets.

In one case, it is surprising to us that a well-known E&P company, advertising itself as one of the ‘greenest’ operators in the US still has over 1,000 high-bleed pneumatic devices across its asset base, or over 10% of all the high-bleed pneumatic devices in the US.

Underlying data into the CO2 intensity of US oil and gas producers is aggregated by basin, by producer and by acreage position here. Another large source of methane leaks is flaring, covered in our note here.

Tree database: forests to offset CO2?

CO2 uptake rates in forests by tree type

Nature-based solutions are among the most effective ways to abate CO2. Forest offsets will cost $2-50/ton, decarboning liquid fuels for <$0.5/gallon and natural gas for <$1/mcf (chart below).

The data-file tabulates hundreds of data-points from technical papers and industry reports on different tree and grass types. It covers their growing conditions, survival rates, lifespans, rates of CO2 absorption (per tree and per acre) and their water requirements (examples below).

Ventures for an Energy Transition?

This database tabulates almost 300 venture investments made by 9 of the leading Oil Majors, as the energy industry advances and transitions.

The largest portion of activity is now aimed at incubating New Energy technologies (c50% of the investments), as might be expected. Conversely, when we first created the data-file, in early-2019, the lion’s share of historical investments were in upstream technologies (c40% of the total). The investments are also highly digital (c40% of the total).

Four Oil Majors are incubating capabilities in new energies, as the energy system evolves. We are impressed by the opportunities they have accessed. Venturing is likely the right model to create most value in this fast-evolving space.

The full database shows which topic areas are most actively targeted by the Majors’ venturing, broken down across 25 sub-categories, including by company. We also chart which companies have gained stakes in the most interesting start-ups.

Permian CO2 Emissions by Producer

This data-file tabulates Permian CO2 intensity based on regulatory disclosures from 20 of the leading producers to the EPA in 2018. Hence we can calculate the basin’s upstream emissions, in tons and in kg/boe.

The data are fully disaggregated by company, across the 20 largest Permian E&Ps, Majors and independents; and across 18 different categories, such as combustion, flaring, venting, pneumatics, storage tanks and methane leaks.

A positive is that CO2 intensity is -52% correlated with operator production volumes, which suggests CO2 intensity can be reduced over time, as the industry grows and consolidates into the hands of larger companies.

Solar Use within the Oil Industry?

This data-file tabulates 20 solar projects being undertaken within the oil industry, in order to clean up production and reduce emissions. More projects are needed, as the total inventory will obviate <1% of oil industry CO2 by 2025.

For each project, we estimate total TWH of power generation per annum, the CO2 emissions avoided, the timeline; and we also summarize the project details.

Leading examples include the use of concentrated solar for steam-EOR in Oman and California, Solar PV in the Permian, and leading efforts from specific companies: such as Occidental, Shell, Eni and other Majors.

At the cutting edge of EOR?

This data-file summarises 120 patents into Enhanced Oil Recovery, filed by the leading Oil Majors in 2018. Based on the data, we identify the “top five companies” and what they are doing at the cutting edge of EOR.

We find clear leaders for water-flooding both carbonate and sandstone reservoirs. At mature fields, we think these operators may be able to derive >10pp higher recovery factors; and by extension, lower decline rates, higher cash flows and higher margins.

As more of the world’s oilfields age, having an “edge” in EOR technology will make particular Oil Majors more desirable operators and partners, to avoid the higher costs and CO2 intensities of developing new fields to replace them.

Lubricant Leaders: our top five conclusions

This data-file presents our “top five” conclusions on the lubricants industry, after reviewing 240 patents, filed by the Oil Majors in 2018. The underlying data on each of the 240 patents is also shown in the ‘LubricantPatents’ tab.

We are most impressed by the intense pace of activity to improve engine efficiencies (chart above), across over 20 different categories. As usual, we think technology leadership will drive margins and market shares. ‘Major 1’ stands out, striving hardest to gain an edge, by a factor of 2x. ‘ Major 2 has the ‘greenest’ lubricant patents, across EVs and bio-additives. Major 4 has the single most intriguing new technology in the space.

The relative number of patents into Electric Vehicle Lubricants is also revealing. It shows the Majors’ true attitudes on electrification, in a context where they are incentivised to sell new products into the EV sector. Our lubricant demand forecasts to 2050 are also noted.

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