Nigeria will need up to $1.5 billion between now and 2030 to reduce methane emissions in the country’s oil and gas operations, the latest report by the International Energy Agency (IEA) has shown.
According to the 2023 report titled: “Financing Reductions in Oil and Gas Methane Emissions, oil and gas majors operating in the largest economy in Africa had a responsibility to contribute $300 million to meet the target.
“Also, the Nigerian National Petroleum Company Limited and other investors in Nigeria’s oil and gas industry will have to contribute $700 million and $500 million, respectively during the same period.”
According to the IEA, there were challenges in mobilising this level of investment, which included a shortage of funds in some cases; economic and institutional barriers, and a lack of infrastructure.
“Others are a lack of awareness about emissions and the cost-effectiveness of abatement, the opportunity cost of investment in methane reduction, and capacity gaps in implementation.”
The report also emphasises the importance of reducing methane emissions in the global oil and gas industry if countries are to continue exploring fossil fuels for economic development.
According to the IEA report, one of the most cost-effective ways to reduce greenhouse gas (GHG) emissions is to reduce methane emissions. This is due to the fact that the abatement measures implemented would generate revenue from the sale of captured methane.
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The IEA said that tackling methane emissions from oil and gas operations is one of the most important measures to limit near-term global warming. In its Net Zero Emissions by 2050 (NZE) Scenario, energy-related methane emissions fall by around 75 percent to 2030 – two-thirds of which comes from reducing emissions from oil and gas operations – and this contributes more than 15 percent of total energy-related greenhouse gas (GHG) emissions reductions to 2030.
According to the report, just over $75 billion in cumulative spending is required by 2030 to achieve these reductions in emissions. The required spending varies widely by geography, operator, and part of the value chain: around $55 billion is needed in upstream oil and gas facilities and just over $20 billion in downstream operations.
Methane abatement in the oil and gas industry is one of the cheapest options to reduce GHG emissions anywhere in the economy. Abatement measures would generate revenues of around $45 billion from the sale of captured methane.
This means the average cost of methane reductions to 2030 is less than $5/tonne CO2-equivalent. Even if there was no value to the captured gas, almost all available abatement measures would be cost effective in the presence of an emissions price of about $20/tonne CO2-equivalent.
Oil and gas companies bear primary responsibility for abatement. The spending required to cut methane emissions in the NZE Scenario is less than 2 percent of the net income received by the industry in 2022. Private sources of finance can provide capital where internal financing options are limited.
The IEA said regulations and policies on methane abatement are essential to drive down methane emissions. These can be paired with public financing, either directly from governments or through multilateral development banks, to help catalyse private investments and fill gaps where private sources of finance may not be willing or able to invest at the levels needed.
“Of the total spending, we estimate that about $15-20 billion needs particular attention to ensure that adequate sources of finance are available.
“This includes the spending required to cut emissions in low- and middle-income countries, especially those without strong methane reduction policies and regulations, at facilities owned and operated by national oil companies and smaller independent companies, and for measures that do not generate meaningful returns over their lifetimes. This is an appropriate area for focused international action.”
According to the IEA, there have been several notable efforts in the past to finance methane abatement. These include international emissions pricing schemes, regional emissions trading markets, sustainability-linked financing, and direct public funding.
“Financing initiatives should be tailored to fit targeted projects and reduction goals and be paired with clear accountability frameworks,” the report stated.
