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Oil major BP’s Permian operations have become key to its clean-energy future

The traditional oil and gas facilities it bought in the Texas oil field were sending more greenhouse gases into the atmosphere than those of its Permian peers.

Now, BP is upgrading those traditional well sites with more emissions controls. And perhaps the biggest change, it has constructed a central oil and gas gathering and processing facility in West Texas, named Grand Slam, that allows the company to capture much of the gas that would have been burned off or vented into the atmosphere. The facility is a cornerstone of BP’s plans to produce oil with the fewest emissions possible, and the company is spending $1.3 billion to build three more of them in the Permian.

So far, nearly every oil giant has a plan to reduce emissions and invest in new energy technologies, but most still plan to grow their core business: oil and gas production.

Most companies, that is, except BP, which aims to cut oil output by 40 percent worldwide by the end of the decade. It plans to sell off $25 billion in oil and gas assets around the globe by 2025 and use the proceeds to help fund the company’s growing renewables business. 

BP’s remaining oil and gas assets will be upgraded, it said, to dramatically reduce emissions released while extracting and processing oil and gas.

“What we’re trying to do here is produce a very clean barrel (of oil), and that’s where our focus is,” said David Lawler, president of BPX energy, BP’s onshore oil and gas business in the U.S. which includes the Permian. “So we will grow somewhat here (in the Permian Basin), but in other parts of the world, we’ll be dialing down production. We’re the only major company that has come out and made that commitment.”

RELATED: Permian Basin oil production predicted to outpace most oil-producing nations this year

BP has produced oil and gas for more than a century. But the intensifying effects of climate change are disrupting the entire industry, and it remains to be seen if a major oil and gas company can make the pivot to a clean energy company. Even so, in September 2020, BP CEO Bernard Looney announced the most aggressive move to cleaner energy of all the oil majors.

As part of the company’s wider strategy, BP is focusing on areas like the Permian Basin in West Texas and New Mexico, where it says it can pump oil with fewer emissions than other places in the world. 

Among the majors, BP is relatively new to the Permian Basin, the country’s most prolific oil producing region that churns out more than 5 million barrels per day. It made its debut in the Permian in 2018 through its acquisition of Australia-based BHP’s onshore U.S. assets for $10.5 billion.

At the time, producers in Texas burned off more natural gas through flaring than any other U.S. state, according to the Energy Department, led by increasing production in the Permian. And in 2019, BP flared more than 13 percent of its natural gas, more than any major producer in the Permian, according to Norwegian research firm Rystad Energy.

This year BP will flare less than a half-percent of the gas it produces in the Permian, similar to the rates of Chevron and Exxon Mobil, said Alexandre Ramos-Peon, head of shale research at Rystad. The reduction followed BP’s pledge in April 2021 to end routine flaring in the Basin by 2025.

But as a producer reduces flaring, it has to move more gas to market or find another use for it. (Producers often say they flare because they don’t have pipelines or tankers to get excess natural gas to customers.) BP’s solution is the Grand Slam facility that began operation in June 2020.

Built near the company’s well sites north of Pecos, Grand Slam is essentially a network of tanks, pipes and other equipment for gathering, transporting, and processing oil, gas and their byproducts. Instead of tanker trucks picking up oil from storage next to a well to process and sell, the oil — along with natural gas and any byproducts — is directly piped to the centralized Grand Slam facility so it can be processed and sent on to customers. Since BP built the facility from the ground up, the company incorporated emissions controls into the design, aimed at controlling or eliminating the release of natural gas at certain connection points. 

As BP worked to clean up its Permian operations, the non-profit research and advocacy group Environmental Defense Fund began monitoring flaring and other sources of methane emissions from oil and gas production in the Texas-New Mexico basin. 

From September 2019 to November 2021, EDF found that BP’s overall rate of methane emissions compared to natural gas produced from its Permian production facilities was higher than that of Exxon, Chevron, Shell and ConocoPhillips.

As the EDF was doing its study, BP was developing its own methane emissions detection system and taking steps to reduce emissions, such as joining industry partnerships, committing to end routine flaring, and frequently monitoring for leaks and other sources of emissions.

The efforts eventually caught the attention of the environmentalists.

“It’s such a diverse industry, there are hundreds and hundreds of oil and gas producers,” EDF policy expert Jon Goldstein said, “and only a small minority are doing the sorts of things that BP is doing.”

BP has at times broken with the wider industry and endorsed proposals like the direct regulation of methane emissions by the federal government, which Goldstein said would be needed to lift some producers to the level of BP’s mitigation efforts. 

RELATED: BP plans Houston-area project that could capture up to 15 million metric tons of carbon per year

For its part, BP hired California-based Kairos Aerospace to monitor its methane emissions. Kairos flies over Permian operations once a month and reports large leaks or other points of emissions. Kairos said it has collected data since late 2019 and found BP’s methane intensity (the percent of methane released compared with total energy production) declined over time, and today is less than 1 percent – on par or below that of other majors.

“Finding and fixing these emissions quickly is an efficient and effective way to reduce the amount of methane released into the atmosphere, which reduces the overall methane intensity,” said Elena Berman, chief science officer at Kairos. “Companies also use this data to understand what causes their emissions so they can implement preventative maintenance — which prevents many new emissions from ever starting.”

While crucial to the overall strategy, experts say BP’s efforts to detect and reduce emissions in the Permian represents a fraction of its plans to transform into a clean energy company.

BP’s Permian Basin plans, like the Grand Slam facility, could become models for low-emission oil and gas production. But experts — and other oil giants — are watching to see if BP’s overall shift to becoming a majority-clean energy company will come to fruition, and how bumpy the ride will be. Still, BP plans to increase annual investment in renewable energy to $5 billion by the end of the decade.

Ramos-Peon at Rystad points out that so far the majority of renewable energy investments have been acquisitions of existing businesses, meaning BP has developed few things of its own. He said a lot of pledges to transition to clean energy have been made by large oil and gas companies, but it’s still uncertain how profitable and successful those new businesses will be.

“BP is taking a major risk there,” Ramos-Peon said. “Good for them if it works out, but they’re really venturing into something that they don’t know as well.”

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