BP/natural gas: little flair and too much flaring

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For an odourless substance, natural gas raises quite a stink. Many climate campaigners see it as highly polluting. Producers promote it as a stepping stone from hydrocarbons to renewables. BP and peers lobbied against European Commission plans to exclude gas-fuelled power plants from sustainable investment designation, Reuters reports.

Loans from the European Investment Bank and countless private investors depend on gas getting a cleaner bill of health than oil or coal. Oil majors, which flubbed chances to take an early lead in renewables, risk being caught flat-footed again. Tightly controlled, gas may be deemed transitional. Unfortunately for groups such as BP, which depends on the fuel for half of output excluding Rosneft, the debate is already moving on.

The European Union has created a taxonomy regulation classifying economic activities as climate friendly or not. The ridiculous designation of “partially sustainable” was mooted at one point for gas. The fuel’s credentials rest on CO2 emissions half those of dirtier coal when burnt.

Unfortunately, methane, which can leak from rigs, pipes and refineries, has a warming effect 80 times higher than CO2 over 20 years. These carbon emissions account for one-sixth of the total from the hydrocarbons industry and up to two-fifths for the gas segment, according to the International Energy Agency.

Gas would only merit transitional status if producers could sharply reduce leaks. One US academic study valued these at more than 2 per cent of total US output in 2015. That diminishes any advantage over coal greatly. “Flaring” of surplus gas by burning is another problem. BP has reduced flaring in Angola and has cut in the US as well — but will not finish until 2025.

Committed thinking anchored by sunk investment destroys shareholder value in swaths. The failures of traditional retailers and car manufacturers illustrate the point, just as oil majors do. Lex argued in 2019 that a tightening of emissions standards for gas could make it genuinely transitional, particularly for coal-heavy Germany and Poland. Businesses and regulators have dithered. Now the opportunity is slipping through their fingers.

The Lex team is interested in hearing more from readers. Please tell us whether you think natural gas is a transitional energy source in the comments section below

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