Methane Abatement in Developing Countries

5. Regulatory building block 2: Setting planning and licencing requirements

Box 5.1. EFFECT recommendations: Planning and licencing requirements

What can governments do?

• Introduce methane reduction requirements in the planning stages of projects, requiring new installations or developments to utilise zero-emitting technologies and have plans in place to capture gas and deliver it to the market

• For new projects, governments should require that field development plans for new oil fields incorporate sustainable utilisation or conservation of the field’s associated gas without routine flaring

• Consider introducing methane emission reduction requirements in upstream exploration and production contracts or licences.

Source: (OECD, 2022[1]).

The 2023 Production Gap Report notes that current government plans and projections would lead to an increase in global oil and gas production until at least 2050, resulting in more than double the amount of fossil fuels in 2030 that would be consistent with limiting global warming to 1.5°C (SEI, Climate Analytics, E3G, IISD, UNEP, 2023[2]). Consequently, to keep global climate targets alive, it is imperative for governments planning to develop new oil and gas projects to take urgent steps to reduce methane emissions as early as possible by including methane mitigation requirements in the initial project planning and licencing phase of oil and gas development.

Introducing methane reduction requirements in project planning and licencing

Governments can introduce methane reduction requirements in the planning and licencing stages of projects to ensure that methane emissions are addressed from the outset and ideally before production takes place. The project planning and licensing stage can be an opportunity for governments to require new developments to utilise zero-emitting technologies and have plans in place to capture gas and deliver it to the market. For example, in Kazakhstan, the Petroleum Law requires operators to develop a plan to capture and use associated gas before receiving regulatory approval to construct new oilfield projects. These plans must be updated every three years and include one (or more) of the following options:

• associated gas may be used by the operator for onsite power generation

• associated gas may be sold to a third party for processing and marketing

• If processing of the associated gas is uneconomic, the gas may be reinjected into an underground reservoir – either for storage or to maintain reservoir pressure (CLDP, 2023[3]).

Examples of the inclusion of methane reduction requirements in project planning can be found in Malaysia and the United Kingdom. For example, in Malaysia, new oil and gas developments are required to be designed for zero continuous flaring and venting. Field development plans are commonly used in both licencing and contractual regimes and provide an avenue for setting out the conditions under which oil and gas operations should take place – see Box 5.2. In the United Kingdom, the North Sea Transition Authority requires that all field development plans for greenfield oil and gas projects include: zero routine flaring and venting, gas recovery systems, low-carbon electricity options, GHG measurements, and new technologies to reduce emissions (World Bank, 2022[4]).

Box 5.2. Field development plans

Following the delineation of a commercial discovery, a field development plan (FDP) will be required to outline how the oil company intends to develop the petroleum field, manage the impact on the environment and society, as well as forecasts for production and costs. Ideally, the FDP should address every stage of the project’s life from initial design, ongoing maintenance and remediation programmes, and finally the decommissioning process.

The FDP is also a useful entry point for regulators to expressly set out methane emission reduction requirements that oil companies must meet during the lifecycle of the field.

Governments should ensure that FDPs include a GHG management plan that specifically covers methane emissions. This could include the requirement to measure emissions from the project, and embed methane mitigation technologies and best practices in the design and operating requirements of the field. A GHG management plan, with specific methane abatement provisions, should include adaptive provisions to allow for the adoption and use of new technologies and practices to further reduce methane emissions within the project area.

FDPs, with their GHG management plans, are a powerful regulatory lever for identifying and mitigating methane emissions in the upstream oil and gas sector emissions. For example, the lack of robust facilities maintenance and remediation is one of the major contributors to petroleum sector emissions in Angola and Nigeria, and an example of where the FDP approval process could be leveraged to lower methane emissions on a site/facility basis.

Source: (AfDB, 2022[5]), (Ogeer, 2022[6]).

References

[5] AfDB (2022), Minimising Greenhouse Gas Emissions in the Petroleum Sector: The Opportunity for Emerging Producers, African Development Bank, Abidjan, Côte d’Ivoire, https://www.afdb.org/en/documents/minimising-greenhouse-gas-emissions-petroleum-sector-opportunity-emerging-producers.

[3] CLDP (2023), Methane Abatement Handbook, U.S. Department of Commerce, https://cldp.doc.gov/sites/default/files/2023-09/CLDP%20Methane%20Abatement%20Handbook.pdf.

[1] OECD (2022), Equitable Framework and Finance for Extractive-based Countries in Transition (EFFECT), OECD Development Policy Tools, OECD Publishing, Paris, https://doi.org/10.1787/7871c0ad-en.

[6] Ogeer, N. (2022), Field Development Plans: A Handbook for Government Officials, Commonwealth Secretariat, https://doi.org/10.14217/comsec.1079.

[2] SEI, Climate Analytics, E3G, IISD, UNEP (2023), The Production Gap: Phasing down or phasing up? Top fossil fuel producers plan even more extraction despite climate promises, Stockholm Environment Institute, Climate Analytics, E3G, International Institute for Sustainable Development, United Nations Environment Programme, https://doi.org/10.51414/sei2023.050.

[4] World Bank (2022), Global Flaring and Venting Regulations: A Comparative Review of Policies, World Bank, https://thedocs.worldbank.org/en/doc/fd5b55e045a373821f2e67d81e2c53b1-0400072022/global-flaring-and-venting-regulations-a-comparative-review-of-policies.