As the Washington Post recently reported, Joe Biden made “the embarrassing move to call on OPEC and its allies to boost oil production as pump prices climb, underscoring alarm over the U.S. loss of energy independence under President Biden. Domestic producers said Mr. Biden should have looked to them to bolster the nation’s oil supply. Instead, Mr. Biden turned to OPEC, a cartel of 13 of the world’s largest oil producers and a handful of nonmember allies, including Russia.”
As we’ve discussed previously, the Biden Administration is focused on prioritizing climate change over the U.S. Oil and Gas Industry but we wanted to find out if this recent decision actually moves us in the wrong direction as it relates to the carbon emissions associated with producing crude oil and natural gas. Specifically, by asking OPEC and its allies like Russia to increase oil production, does this actually result in increased CO2 emissions as compared with asking domestic producers to increase production? We were surprised at what we discovered.
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How Does US Production Compare?
The United States has become the leading producer of crude oil worldwide, accounting for over 18.6% of global crude oil production. Next in line is Saudi Arabia with 12.5% and Russia with 12.1% of the global oil supply. With Biden calling on Saudia Arabia and Russia to boost production, would this result in greater CO2 emissions than if he had asked producers in the United States to boost production? To answer this question, we turned to the data.
According to the largest natural gas producer in the United States, EQT, their emissions intensity is “less than half the emissions intensity of Russia”. This is based on data provided by EQT and industry research firm Rystad Energy. In fact, EQT as a company has lower carbon emissions intensity than Canada, Iraq, Iran, Russia, China, and Saudi Arabia.
That said, the United States as a whole comes in at around 15 kg of CO2 emissions per Bcfe (Billions of Cubic Feet Equivalent) of hydrocarbon production which is less than Russia (around 16 kg CO2e/Bcfe) but more than Saudi Arabia (around 10 kg CO2e/Bcfe). One of the reasons that Saudi Arabia is lower than the United States is because it produces less associated gas with its crude oil than we do domestically, and therefore has less flaring. Flaring natural gas is one way that the carbon intensity increases and this practice is thankfully being reduced globally but especially here in the United States.
Upstream CO2 Emissions Intensity in US Basins
While we were surpised to learn that the United States had higher CO2 emissions intensity associated with its oil and gas production, this is not the case across the board. When you look at the major basins and plays in the United States, most are actually below or are on par with Saudi Arabia.
Specifically, Appalachia comes in the lowest at 7.1 kg CO2 per BOE (Barrel of Oil Equivalent), followed closely by the Haynesville (7.5 kg CO2/BOE). Not surprisingly, these are natural gas plays where operators aren’t going to produce the wells unless they have a place to take it (namely a pipeline) vs. the routine flaring of gas.
The next three basins to come in between 10.6 – 11.0 kg CO2/BOE are the Niobrara (Colorado/Wyoming), Permian (Texas), and Eagle Ford (Texas). Finally, the Bakken is reported to produce around 20.7 kg CO2/BOE. The higher CO2 intensity of these other plays can be partially explained by the fact that they are primarily oil producing plays with a large amount of associated gas (natural gas produced as a by-product of crude oil production). Historically, when operators did not have a natural gas pipeline to connect to, this “stranded natural gas” was burned or flared. Flaring natural gas does emit a higher amount of CO2 than if this natural gas were compressed and sent to a gas plant via pipeline for ultimate use by the consumer.
North Dakota (the Bakken) and Texas (Permian, Eagle Ford, and others) combined account for 85% of the natural gas venting or flaring in the United States so it is no wonder that these plays have a higher CO2 footprint. It is good to see states implementing limits on flaring and ensuring that producers have a plan in place for transporting natural gas before new drilling permits are issued but we still have a ways to go. Besides the impact on the environment, royalty owners typically don’t receive payment for vented and flared natural gas (depending on their oil and gas lease terms). So it is a win-win when gas is sold via pipeline vs. wasted or burned without beneficial use.
Fact Check
Because of some of the somewhat conflicting data that we found around the carbon intensity of production between the United States and Saudi Arabia, I felt it important to check the numbers ourselves using publicly available data. To do this, we used data provided by the EPA (CO2 emissions from onshore oil & gas production) and the EIA (total production by year).
According to a comprehensive oil field carbon intensity (CI) study led by Stanford University, the CI measurement is approximately 27 kg of CO2 equivalent per barrel of crude oil produced by Saudi Arabia.
According to the EPA, 117 million metric tons of CO2 were emitted from U.S. onshore oil & gas production in 2019. This translates to 117 billion kg of CO2.
That same year, the United States produced a total of 4,485,653,000 barrels of crude oil (an average of around 12.3 million barrels per day). Dividing these two numbers together yields a carbon intensity of 26.08 kg of CO2 per barrel of oil produced. Now since this number is based on the total US oil production (including offshore production), it may be skewed slightly. To correct for this, I subtracted the production from Federal Offshore leases which totaled 697,040,000 barrels in 2019 according to the EIA. This yields 3,788,613,000 barrels of onshore crude oil production in 2019. Taking this smaller number into account, the onshore U.S. oil production carbon intensity equals 30.88 kg of CO2 per barrel of oil produced which is slightly higher than Saudi’s 27 kg CO2/bbl metric.
Conclusions
We found several conflicting studies on the emissions intensity of crude oil and natural gas production globally but the general conclusion is that most countries are worse than the United States and several countries are actually better when it comes to carbon emissions. Most notably, OPEC member countries like Iran and Iraq and OPEC allies like Russia appear to have much higher emissions intensity than the United States. Surprisingly, Saudia Arabia actually appears to be slightly better than the U.S. when it comes to the carbon intensity of their crude oil production.
Simply calling on our trading partners to increase production may actually have the unintended consequence of increasing the carbon emissions intensity associated with this incremental production. Additionally, by limiting domestic oil and gas production, we will be at the mercy of OPEC as it relates to the price of crude oil and it will weaken our ability to remain energy independent. Not to mention, it hurts tax payers here in the US due to lower royalty payments to individuals and companies and higher prices at the pump.
Resources Mentioned in This Episode
- MRP 114: The Dark Side of the Energy Transition and the ESG Movement
- EQT Reshaping Strategy for Era of ‘Sustainable Shale’ (data comparing 2019 emissions intensity of United States vs other major producing countries and how EQT stacks up).
- Study shows record low carbon intensity of Saudi crude oil
- US gas production to hit record levels in 2022: Rystad Energy (comparison of CO2 emissions in key US shale basins)
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