Activating National Oil Companies for Climate Progress: Financial Strategies to Cut Methane Pollution

Activating National Oil Companies for Climate Progress

Financial Strategies to Cut Methane Pollution

Methane is a powerful greenhouse gas, responsible for more than one quarter of the warming we are experiencing today, and global oil and gas production is a major source of methane emissions. Reducing oil and gas methane emissions is a crucial and practical means to quickly slow the rate of global warming, even as we fully decarbonize our energy systems.

After more than a decade of science-backed public, regulator, and investor pressure, all seven global supermajors and many public and private energy companies have begun to take action on improving their methane management.

National oil companies (NOCs) produce more than half of global oil and gas supplies, but the vast majority are not effectively managing their methane emissions.

Reducing oil and gas methane emissions is a crucial and practical means to quickly slow the rate of global warming, even as we fully decarbonize our energy systems.

NOCs are essential for tackling emissions

National Oil Companies are essential for tackling emissions

As NOCs play catch-up in the race to curb methane pollution, the finance sector has an important role to play because methane emissions present a material risk to national oil companies, their host governments, and their financial stakeholders.

In tackling the issue, NOCs can access extensive resources within the industry and outside of it. For example, companies can join the Oil and Gas Methane Partnership 2.0 (OGMP 2.0), which represents more than 40% of global oil and gas production. Joint venture partners, banks, and investors are also potential resources, and many of them have climate targets that extend to the companies that they fund or transact with.

of the top 20 publicly traded companies have set methane targets.

of the top 20 NOCs have set methane targets.

Tools for NOC methane abatement

The pathways for NOCs to reduce methane emissions borrow heavily from learnings by their private sector and publicly traded peers and include four key steps.

Measure methane emissions

Despite the availability of a diverse and increasingly affordable portfolio of measurement solutions, too many companies rely on desk-based methods to estimate methane emissions. The most credible way to get on this path is to join OGMP 2.0, which lays out a pathway to using direct methane measurement to target emission reductions.

Set ambitious methane reduction targets

These should align with the methane intensity targets set by OGMP 2.0, of 0.2% methane intensity by 2025 or near-zero methane emissions by 2030. As of now, just eight of the top 20 NOCs have set measurement-based methane targets through OGMP 2.0.

Operationalize methane reduction targets

This means allocating capital and technical resources and aligning management incentives towards meeting methane goals. Financial parties should help NOCs access and best utilize capital towards accelerating methane management.

Collaborate for methane mitigation

Large, well-resourced companies with more experience in methane mitigation should assist their less-resourced peers to get on track, especially when they share joint ventures.

Resources

Financing Methane Abatement: An introduction to sustainable finance instruments

By Andrew Howell, Sudhanshu Mathur, Lenora Suki

Creating the right financial instruments can enable cash-constrained national oil companies to pursue rapid oil and gas methane abatement.
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Shared Duty: National, International Oil Companies Bound Together by Methane Obligations

By Andrew Baxter et al.

To deliver on broader climate pledges, industry must engage national oil companies in its efforts. Joint venture partnerships are a crucial channel for technical and financial support from IOCs.
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NOCs’ Oversized and Overlooked Methane Emissions, How Finance and Industry Must Help

By Andrew Baxter

The UN climate talks at COP28, hosted in Dubai at the end of 2023, will shine a bright light on the pivotal role national oil companies, like UAE’s Abu Dhabi National Company (ADNOC), can and ultimately must play in the fight against climate change – particularly the urgent need to reduce methane emissions from the oil and gas supply chain.
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State-owned oil companies lag on methane. Could the finance sector hold the key?

By Andrew Howell & Andrew Baxter

Most publicly traded oil and gas companies have set targets to cut methane emissions, but national oil companies remain largely on the sidelines. Their investors and lenders face heightened risk.
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National Oil Companies, Climate Commitments, and Methane

By Ben Cahill and Kjersti Swanson

National oil companies play a unique role in the global energy system, and charting the long-term shift away from fossil fuels means grappling with the role of these companies and with oil- and gas-dependent states more broadly. Through an analytical framework of NOC-state relations, this report assesses the drivers for these companies’ climate strategies and discusses challenges for various NOCs as well as areas of progress.
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