Premium Grows for US Gas Certified as 'Low-Emission'

Copyright © 2023 Energy Intelligence Group Fri, Mar 10, 2023

Author Caroline Evans, Houston

Global buyers are increasingly willing to pay more for US natural gas that has been certified as low-emission, top industry officials agree, although the market is still evolving as customers weigh the costs and benefits.

“We are seeing a premium on the gas in several markets,” BPX CEO Dave Lawler told a press briefing at CERAWeek by S&P Global this week in Houston. “I think there's an expectation that you provide low methane-intensity gas. And so we're, we're kind of playing into that request.”

Lawler was referring to the BP subsidiary’s announcement that it had received certification for its entire US onshore portfolio. He told reporters Mar. 6 that all of the assets have been certified at or below a methane intensity level of 0.2%, the benchmark that MiQ, which completed the certification, considers a “C” grade.

“What that means is that we feel like our product will be in demand,” Lawler said. “We’re able to kind of certify to consumers that we’re producing the gas in a responsible way.”

‘Tricky’ Environment

A handful of firms like MiQ and Project Canary certify natural gas by gathering an array of emissions data from facilities and comparing it to a standard. But the lack of a single standard can make it difficult for customers to discern how environmentally friendly their purchases are.

EQT CEO Toby Rice told Energy Intelligence on the sidelines of the conference that he foresees the market developing carbon-intensity scores that would allow so-called responsibly sourced gas to be benchmarked against other products and differentiated on price.

“I think the world knows that responsibly sourced gas is a good thing, but putting a value on that has been tricky,” said Rice, who helms the largest US gas producer. “I think in the next 24 months, you're going to see a lot of progress on companies getting that carbon intensity score. That's certainly the focus for us at EQT.”

To that end, midstream operators are also working to decarbonize their assets to appeal to increasingly environmentally minded buyers. Late last year, pipeline giant Williams announced a deal with producer Coterra Energy and utility Dominion Energy Virginia to certify gas across all segments.

“We have seen the market willing to pay and differentiate,” Chad Zamarin, Williams' executive vice president of corporate strategic development, told Energy Intelligence. “But what I think it demonstrates is, it's not enough to just produce gas responsibly. And in fact, if you look at where the emissions from our value chain come from, that's a relatively small portion of the overall emissions footprint. It's also the easiest to measure. These are single point locations. We move through a very complex network of infrastructure. And so mapping the most energy efficient paths across which gas can flow is what we're focused on doing.”

Government Standard?

While certification is currently a private-sector affair, reports have swirled recently that the Department of Energy (DOE) is exploring developing a standard for natural gas that would help US production compete globally against other lower-carbon sources. Opinions differ within the industry, however, of what that should look like or even if now is the right time for standards.

Lawler said a government standard would be “consistent” with BPX's strategy. “We feel like it's a product that the world does need, but we also have to demonstrate that we're delivering that product in the right way. And so we're working toward the same goals as the Biden administration, and there's no real difference between the things that they've proposed and what we're acting on.”

While Zamarin said Williams has been “very involved” in discussions on a standard and planned to participate in a roundtable with government officials during the conference, he said the focus should be on unlocking funding to develop the equipment needed to better measure and mitigate emissions — akin to the Inflation Reduction Act.

“I think we're at the stage now where DOE, the federal government, should be working with industry to really drive technological advancement,” he said. “There will be a time where setting the standards, regulating the standards comes. But I don't even think we're at a stage yet where we know how good we could get.”

Will Jordan, general counsel at EQT, warned against a standard that could have a chilling effect on the gas industry.

“I think if it's something that recognizes where the world's lowest emissions natural gas sits and is an effort to actually unlock that so that the rest of the world can have access, that’s great,” he said. “If it's about labeling something as non-differentiated gas and putting the foot on the accelerator trying to phase that out, I think it's a misunderstanding of the problem we're in right now.”