5 steps Oil & Gas companies can take now to mitigate methane emission charges

Remarkably, the oil and gas industry in the United States has openly welcomed the country’s primary climate law – The Inflation Reduction Act. Industry leaders have praised the significant incentives offered by the Inflation Reduction Act (IRA), particularly for initiatives like carbon capture, utilization, and storage (CCUS), the development of zero-emission hydrogen, and even mineral production. These activities align with what some major oil and gas companies consider their core strengths. 

However, clean energy accounted for less than 5 percent of the oil & gas industry’s upstream investments in 2022. Dividend payments, share buybacks, and debt repayment constituted the majority of total sector expenditure, far outweighing investments in decarbonized energy. 

While methane emissions constitute a smaller portion, just 11 percent, of the total national greenhouse gas emissions, compared to carbon dioxide’s substantial 79 percent, their reduction can yield significant climate advantages. Methane is a far more potent heat-trapping agent than carbon dioxide, with the ability to trap 87 times more heat in the Earth’s atmosphere during the initial twenty years after its release. Additionally, methane has a relatively brief atmospheric lifespan of approximately 10 years. Considering these factors, taking steps to reduce methane emissions now can play a crucial role in mitigating climate change in the short term. 

As per the EPA, methane emissions primarily stem from agriculture, making up 38% of the national total in 2020. It is followed by the oil and natural gas sector at 33% and waste management at 16%.  

The methane emissions charge introduced in the IRA will only target specific segments of the oil and natural gas sector. Nevertheless, its implementation represents a significant step forward for substantial climate benefits. 

The methane emissions fee will commence at $900 for each metric ton of emitted methane in 2024, followed by increments to $1,200 in 2025 and $1,500 in 2026. 

Here are the five steps oil and gas companies must take to immediately reduce their methane emissions.  

1) Decreasing operational emissions – Within the United States, emissions from oil and gas operations contribute to approximately 10 percent of the total emissions. It is becoming increasingly important to decrease scope 1 and 2 emissions, which come from producing and transporting oil and gas products. These emissions have a greater impact on climate change than all the cars in the world combined. In some instances, reducing operational emissions can be one of the most cost-effective and impactful ways to combat climate change.

2) Productional wastage reduction:  On a global scale, the elimination of emissions from oil and gas production wastage has the potential to reduce approximately 5 gigatons of CO2-equivalent, which is equivalent to 60 percent of the world’s transportation emissions. In fact, a 2021 report by the International Energy Agency revealed that nearly 45 percent of global methane emissions from oil and natural gas operations could be mitigated.

3) Reducing fugitive emissions: The majority of methane emissions originating from the oil and natural gas sector occur due to unintentional leaks (fugitive emissions) and deliberate venting of natural gas, which is predominantly methane. Preventing these leaks and venting not only helps in reducing methane emissions and addressing climate change but also carries financial benefits for oil and gas producers. When oil and gas companies capture methane and distribute it as natural gas, it can generate revenue that offsets the costs of implementing capture systems.

4) Manage flaring and venting: Implementing measures such as stopping regular flaring and venting, finding leaks, swapping out certain pressure devices, and building infrastructure to capture and use methane as natural gas can be greatly effective. Most of these measures can be carried out using cutting-edge AI technologies, like AI and digital twins. Digital twins are powerful tools that can help make processes work better, manage risks, keep an eye on the health of equipment, and plan for different situations. They can even spot problems before they turn into real issues. 

5) Reducing emissions from storage tanks: Storage tanksare crucial for collecting and temporarily storing crude oil, condensates, and water. Gas concentrations often remain in the liquid directed to a storage tank, accumulating in the space above the liquid level, known as tank vapors. Various losses, including flash, working, and breathing losses, contribute to emissions from storage tanks. These emissions can be mitigated through real-time monitoring and tracking of fuel collection data.  

Track. Trace. Reduce.

Reducing methane emissions begins by establishing a solid strategy. There is a wide array of technologies available, such as methane and flare monitoring, which can assist in determining the most efficient approach for managing a company’s assets. 

After formulating a comprehensive plan, the next step involves measuring the baseline methane and flare emissions across the entire asset portfolio. Innovative solutions like Eugenie’s digital twins facilitate this process by utilizing satellite-based tracking to pinpoint high-emission assets, displayed on a user-friendly emission dashboard. 

Once measurements are gathered, and high-emission sources are identified, it is crucial to take action. At this stage, operators need to focus on reducing emissions by addressing leaks through fieldwork and implementing low-emission equipment.


The oil and gas industry is a significant contributor, responsible for about 20 percent of methane emissions caused by humans. Methane is a potent greenhouse gas, about 80 times more effective at trapping heat in the atmosphere than carbon dioxide over a 20-year period. The good news is that because methane doesn’t stay in the atmosphere for long, reducing its emissions can help reverse some of the warming effects. 

Additional climate actions are still required to lower operational emissions. The IRA includes a range of provisions designed to assist the oil and gas sector in achieving climate neutrality for scope 1 and 2 emissions. These measures could potentially be among the most impactful aspects of the law in addressing climate change.

If we work together across different sectors, like fossil energy, waste management, and agriculture, we could prevent nearly 0.3 degrees Celsius of global temperature rise. This would be a crucial step in helping us stay within the 1.5-degree limit for global warming, which is a key goal in our fight against climate change. 

To know more about Eugenie’s digital twins for the oil & gas industry, register for a demo or write to us at [email protected]