27 August 2019
The Dutch oil and gas industry will halve greenhouse gas emissions from its offshore activities in the next two years. This was agreed in a covenant signed between the industry and the government.
Last Monday, Jo Peters, Secretary General of NOGEPA, and Minister Eric Wiebes (Economic Affairs and Climate Policy) signed a covenant in which the Dutch offshore oil and gas industry undertakes to halve methane emissions within two years. It has drawn up an ambitious reduction programme to achieve this goal. In turn, the government is calling for a joint study with the industry into the framework conditions that will enable further reductions in the longer term, for example, switching the energy supply of key offshore installations to renewable electricity. Currently, some of the gas produced is still consumed by the platforms. Electrification is also needed to keep the gas infrastructure available for future CO2 storage and potentially also for the production, transport and storage of green hydrogen.
Jo Peters: “Whatever scenario you look at for the energy transition, natural gas will still be part of it for many years to come. In which case, it is best to produce that gas, where possible, at home. The Dutch oil and gas industry currently produces around a quarter of the natural gas consumed in the Netherlands from the so-called small fields. We believe it is important to continue this gas production as long as the reserves are there and there is demand for it. One of the conditions, of course, is that it is done in the best possible way. In other words, as climate-friendly as possible. This is why we are pleased to commit to this ambitious but achievable target, according to our members. And, together with the government, we are examining the framework conditions that will have to be met to reduce the impact of our activities even further."
Minister Eric Wiebes: “I congratulate the industry on this ambitious methane reduction programme. As 2050 approaches, we will phase out the use of gas, but until then, we need natural gas whether we like it or not. Natural gas production produced at home in the Netherlands is our preferred option. It not only has a smaller lower on climate than imported natural gas, but it generates money instead of costing money. This programme is a clear signal from the industry that it takes its social role seriously and is taking specific measures to further reduce the climate impact of oil and gas production.”
In the covenant, NOGEPA describes how measures in the context of the Declaration of Intent on the implementation of environmental policy by the oil and gas extraction industry ('Intentieverklaring uitvoering milieubeleid olie- en gaswinningsindustrie') have already led to a large reduction in emissions since 1990. Methane emissions in the entire oil and gas sector decreased gradually by 47,900 tonnes (an 80% reduction) between 1990 and 2017. This is equivalent to an emissions reduction of about 1.5 million tonnes of CO2. In the covenant, NOGEPA's members commit themselves to a further reduction in the next two years. The objective is to reduce the combined emissions of existing offshore production platforms from 8,562 tonnes of methane in 2017 to 4,281 tonnes by 31 December 2020 (a 50% reduction). This corresponds to 120,000 tonnes of CO2.
Best Available Techniques
Development of the reduction programme is based on using best available techniques (BAT) The reduction potential and cost-effectiveness of measures were then studied. The cost-effectiveness criterion automatically ensures the implementation of measures that lead to the greatest reductions. The cost-effectiveness criterion is based on the CO2 price (as per the European Emissions Trading System (ETS)) at the time of identification and a selection of measures. The Dutch oil and gas sector is the first industrial sector to explicitly link the ETS with methane emissions as a greenhouse gas.
Development of the reduction programme is based on using best available techniques (BAT) The reduction potential and cost-effectiveness of measures were then studied. The cost-effectiveness criterion automatically ensures the implementation of measures that lead to the greatest reductions. The cost-effectiveness criterion is based on the CO2 price (as per the European Emissions Trading System (ETS)) at the time of identification and a selection of measures. The Dutch oil and gas sector is the first industrial sector to explicitly link the ETS with methane emissions as a greenhouse gas.
A substantial increase in the European CO2 price during the term of this agreement may therefore give rise to a rethink of the cost-effectiveness criterion for measures taken within this programme. A 50% reduction is achievable based on the cost-effectiveness criterion in its current form.
Electrification
Electrification of offshore production platforms is an effective option for further methane emissions reductions but requires a connection to the offshore grid. However, the outline conditions for this have yet to be developed. Platform electrification is itself a key outline condition for enabling CO2 transport and storage in depleted oil and gas fields in the medium term (by 2030) and in the longer term (by 2050). The existing infrastructure can be used to produce, transport and store hydrogen at sea. The platforms must also be hooked up to the electricity grid. Furthermore, the electrification of gas platforms results in a direct CO2 saving of 0.5-1.0 million tonnes per year. The oil and gas sector can therefore make a substantial contribution to the objectives of the Climate Agreement and the development of the new energy system.
Electrification of offshore production platforms is an effective option for further methane emissions reductions but requires a connection to the offshore grid. However, the outline conditions for this have yet to be developed. Platform electrification is itself a key outline condition for enabling CO2 transport and storage in depleted oil and gas fields in the medium term (by 2030) and in the longer term (by 2050). The existing infrastructure can be used to produce, transport and store hydrogen at sea. The platforms must also be hooked up to the electricity grid. Furthermore, the electrification of gas platforms results in a direct CO2 saving of 0.5-1.0 million tonnes per year. The oil and gas sector can therefore make a substantial contribution to the objectives of the Climate Agreement and the development of the new energy system.
However, the sector will only be able to electrify the key production platforms if the economic and organisational outline conditions are met. NOGEPA has identified the most important of these:
- Generic investment relief of 40%;
- Legal anchoring for the connection of offshore production platforms to the offshore energy grid;
- Agreed connection conditions, including rates;
- Compensatie van onrendabele kosten van elektrificatie.
In the covenant, the parties agreed to jointly examine how further emissions reductions could be achieved beyond 2020 and what is needed for this.