Record volume of certified gas hits US markets after strong commitments in 2021

spglobal.com

Highlights

EQT, Seneca, Chesapeake, BPX Energy complete certification

Approximately 5 Bcf/d of Appalachia gas certified

Around 1.2 Bcf/d of Haynesville production certified

Record volumes of gas certified for its environmental credentials have come to the market after nearly two dozen US gas producers committed to external assessment of their emissions and ESG criteria last year.

Over the last week, two US gas producers announced the completion of third-party certification processes, adding up to 5 Bcf/d of certified gas in Appalachia.

EQT, the largest US gas producer, announced on Jan. 14 that it had certified the majority of its natural gas production under both Equitable Origin's EO100 Standard for Responsible Energy Development and the MiQ Standard on methane emissions. The producer received both certifications in November, with digital attribute certificates becoming available more recently, according to a Jan. 14 press release. EQT produces around 4 Bcf/d in Appalachia.

"These results not only enable us to unlock growing domestic and international markets that are valuing a differentiated commodity, they also serve as an important validation of the environmental attributes of Appalachian natural gas," EQT CEO Toby Rice said in a Jan. 14 statement.

EQT has also partnered with Denver-based continuous monitoring firm Project Canary on a pilot program, installing Canary X sensors on two well pads in southwestern Pennsylvania.

Earlier in the week, National Fuel Gas Company announced that its production arm, Seneca Resources, had received certification from Equitable Origin for just over 1 Bcf/d of Appalachia gas production.

"As we look ahead, we expect that the certification of Seneca's entire Appalachian natural gas base will differentiate our responsibly sourced, low methane-intensity production with end-users and commercial markets," Seneca Resources President Justin Loweth said in a Jan. 11 statement.

Like EQT, Seneca Resources has also partnered with Project Canary for a pilot program, which will assess around 300 MMcf/d of Appalachia gas production.

The two statements come on the heels of two earlier announced certifications in December, which added 1.2 Bcf/d of certified gas in the Haynesville Shale.

On Dec. 21, Chesapeake Energy confirmed that it had completed Equitable Origin and MiQ certification for approximately 1 Bcf/d of Haynesville gas production. The producer has also partnered with the two organizations to certify its Appalachia gas production, which is expected to be completed by the end of the second quarter of 2022, as well as signed pilot project deals in both basins with Project Canary. Additionally, Haynesville producer Vine Energy, which was acquired by Chesapeake in November, sought out Project Canary certification for the entirety of its production in August.

On Dec. 8, BP's US onshore production business, BPX Energy, announced that it had received an 'A' grade on the MiQ Standard for approximately 200 MMcf/d of South Haynesville gas production in Texas.

Trading

With the certified gas market in its infancy, no clear consensus has been found on how this new product will be traded or where.

Several platforms to facilitate the trading and tracking of certified gas certificates – either bundled with physical natural gas or unbundled—have emerged, including the MiQ Digital Registry and Xpansiv.

MiQ launched its global secure digital ledger, the MiQ Digital Registry, in December to hold and track certificates from issuance to retirement. With many producers choosing to seek out multiple certifications, the MiQ Digital Registry has offered joint MiQ-EO100 certificates, as well as MiQ certificates. In addition to EQT, at least two other US producers have simultaneously sought out certification from both MiQ and Equitable Origin.

Xpansiv, an exchange that specializes in environmental commodities like carbon offsets and RECs, partnered with S&P Global Platts to launch Methane Performance Certificates in early October, which can be issued and tracked with Xpansiv's Digital Fuels Registry.

Platts MPCs represent gas produced with a methane intensity of 0.1% or lower and are unbundled from the natural gas production underpinning each certificate's creation. As of Jan. 13, the price of an MPC was assessed at $0.049/MPC, or $7.903/mtCO2e.

Xpansiv has also partnered with Project Canary, agreeing in November to provide the exchange with methane-emissions data gathered from its continuous monitoring systems.

Grades

EQT, Chesapeake Energy, and BPX Energy all reported receiving an "A" grade on MiQ's sliding scale of "A" to "F". An "A" grade represents a methane intensity of 0.05% or less while an "F" is more in the ballpark of 2%.

To put an intensity of 0.05% in context, One Future, a consortium of energy companies committing to reducing methane emissions, had a gas production sector goal of 0.283% in 2020, according to its most recent methane emissions intensity report.