Summary
- Midstream is generally a small component of overall energy sector greenhouse gas (GHG) emissions for petroleum , but midstream’s natural gas operations tend to have more significant emissions.
- North American energy infrastructure companies are setting net-zero emissions targets. Nine constituents in the Alerian Midstream Energy Select Index (AMEI) have a target to reach net-zero emissions by 2050.
- Companies are modernizing equipment, using more renewable energy, and investing in carbon capture technology to reduce emissions as they progress toward theirgoals.
Midstream companies are taking steps to reduce their emissions, with select names even targeting net-zero emissions by 2050. Where do midstream emissions come from, and how can companies mitigate those emissions? This note addresses those questions and discusses the incremental steps companies are taking on their path to achieving net-zero emissions in the future.
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Contextualizing Midstream GHG Emissions
Within the oil and gas industry, production-related activities tend to generate the bulk of GHG emissions, but midstream assets like pipelines, processing plants, and storage facilities also contribute. Infrastructure like pipelines and tanks are intended to contain commodities, so where do midstream GHG emissions come from?
For oil, transportation of crude is estimated to have accounted for just 0.3% of total GHG emissions from petroleum systems in 2022, according to the U.S. Environmental Protection Agency (EPA). Emissions from oil transportation mainly come from tanks, marine loading, and truck loading.
For natural gas, emissions from processing, transmission, and storage activities are estimated to have accounted for 39% of all GHG emissions from natural gas systems in 2022 [1]. Compressor stations, which push gas through a pipeline, are a significant source of methane emissions during transmission and processing, according to the EPA report. Compressor stations are commonly powered by natural gas, which is mostly comprised of methane, and excess methane is released as exhaust when not fully combusted.
Reporting on Emissions Presents Challenges
Midstream companies are investing in ways to lower GHG emissions and reduce their carbon footprints. However, for methane specifically, it is difficult to identify and quantify methane leaks. This presents an invisible challenge, where companies can’t measure the entirety of the methane emissions problem or progress made towards reducing those emissions.
Governments are also beginning to ask companies to substantiate claims they make regarding climate initiatives to prevent greenwashing. Canada for example, enacted the Bill C-59 amendment to its Competition Act in June, which prohibits false or misleading representations concerning the environment and climate. Similarly in March, the European Union adopted a new amendment to legislation requiring company environmental claims be ‘adequately substantiated’ among other restrictions on environmental claims.
International reporting standards for GHG emissions are currently in the early stages of being developed and adopted. The Global Reporting Initiative (GRI) and the International Financial Reporting Standards Foundation (IFRS) have issued GHG emissions reporting standards, and midstream companies are beginning to follow their guidance.
Focus is on Scope 1 and 2 Emissions
Energy infrastructure companies are investing in emissions mitigation and select names have stated targets to reach net-zero emissions by 2050 in line with global climate goals. For the most part, emissions from midstream activities fall under Scope 1 and 2 of GHG classifications. Scope 1 includes emissions that get released directly, for example as oil is loaded onto shipping carriers. Scope 2 includes emissions released indirectly, for example the emissions from generating electricity to power natural gas processing plants.
Scope 3 includes indirect emissions from activities that are not owned or controlled by a company. There is some uncertainty around the definition for midstream, but Scope 3 could include emissions from the source of electricity (i.e., a coal or natural gas power plant).
Midstream’s efforts to reduce emissions have mostly been directed towards the Scope 1 and 2 emissions that can be more directly controlled. Williams Companies (WMB), for example, aims to reduce scope 1 and 2 emissions 56% by 2030, while Enbridge (ENB) is targeting a 35% reduction in Scope 1 and 2 emissions by 2030. The table below shows constituents of the Alerian Midstream Energy Select Index (AMEI) and the Alerian Midstream Energy Dividend Weighted Index (AEDW) that have net-zero emissions targets. Over 30% of each index by weighting as of July 23rd have net-zero targets in place.
How Will Midstream Reduce Emissions?
Reaching net-zero emissions will clearly take time and incremental effort. Available solutions for midstream include using renewable energy to power facilities, upgraded compression technology, and carbon capture and sequestration (CCS).
To achieve its 2030 reduction targets, ENB is focused on modernizing equipment and using low-carbon and renewable energy. This includes upgraded and more efficient compressor stations and recompression units to reduce methane venting. Enbridge has also built solar power projects to self-power some Midwest operations.
CCS technology can also be used to reduce GHG emissions at natural gas processing plants and other facilities. For example, DT Midstream (DTM) is developing a CCS project to mitigate emissions in Louisiana from gas treatment plants and pipeline compressors. The project, which is targeted for final investment decision in 2H24, is expected to be the cornerstone of DTM’s emissions reduction strategy. In April, Kinetik Holdings (KNTK) entered an agreement with electrofuels producer Infinium, which will purchase the captured carbon from one of KNTK’s amine gas processing facilities in West Texas to make low-carbon fuels (more on amine gas treating).
For infrastructure that utilizes power from the local grid, companies can source low-carbon energy through renewable power purchase agreements or PPAs (read more). For example, TC Energy (TRP CN) secured 600 megawatts (MW) in the U.S. and 416 MW in Canada of renewable PPAs in 2022 to help decarbonize its energy consumption.
Bottom Line:
North American energy infrastructure companies are making progress on climate and sustainability goals, with some companies committing to reaching net-zero GHG emissions by 2050 or sooner. Several names are targeting partial reductions by 2030 and are adopting technologies related to monitoring, preventing, and reducing emissions.
Related Research:
Midstream Pulling Multiple Levers to Reduce Emissions
For more news, information, and analysis visit the Energy Infrastructure Channel.
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[1] Based on EPA estimates for 2022. Processing excludes gathering transmission. Transmission and storage includes liquefaction.