It is hard to imagine any viable path towards decarbonization that doesn’t require more collaboration and transparency. Over 1000 oil and natural gas operating companies are responsible for supply chain emissions in the US that, along with combustion, account for at least 10% of reported greenhouse gas emissions to the US EPA [1].
Without collaboration between interdependent supply chain segment operators, efforts to reduce well-to-gate carbon footprints will be frozen (and relatively unseen) in their respective silos. This scenario will create more confusion and complexity. The risk is that our shared climate challenges will become less achievable in the process.
There are two key players in the emission reduction scenario: operators and buyers. In this case, “Operators” refers to the entire supply chain, including production, gathering & boosting, processing and transmission & storage. Where LNG is concerned, the term ‘operators’ also includes liquefaction, cargo and regasification.
On the buyer side of the equation is every buyer, large or small, that uses natural gas, from utilities to large power producers and end users like industrial buyers in cement, chemicals, hydrogen manufacturing, steel, refining, and so on.
So far, production-segment operators are rising to the challenge of methane reduction to the tune of 19 bcf per day by adopting the MiQ performance standard for certified gas – an open-source standard that is designed to allow for “apples-to-apples” comparisons. They have shown that methane emissions can be reduced by up to 95% in the upstream segment, compared to the US Average[2].
However, these gas producers rely on gathering and boosting companies to offtake their gas. In turn, those companies rely on transmission and storage companies to transport or store their gas until delivery to end users or local distribution companies (LDC’s). This interdependence must be leveraged to create a complete certified supply chain that buyers value and trust.
Thanks to the emerging use of registries, and frameworks like the MiQ certified supply chain, certified emissions from each segment can be linked together – or transacted separately – to create a complete well-to-gate emissions profile. Gas producers, LNG producers, or even gas marketers, can play a key role by compelling their downstream collaborators to certify their emissions as proof of a superior emissions performance and/or a commitment to continual improvement by certifying and benchmarking progress over time.
Gas buyers depend on the participation and collaboration of upstream operators to take advantage of emission tax credits and export standards; each requires a complete, certified supply chain. One such tax credit is the IRA (Inflation Reduction Act) tax bill, and its production tax credits such as 45V that rely on low emissions to make so-called blue hydrogen projects possible (that is, hydrogen manufactured from fossil gas using SMR (steam methane reforming) and carbon capture). A second is the CBAM (Carbon Border Adjustment Mechanism), the European Commission’s landmark tool to combat carbon emissions for all industrial processes, including imports for green fuels, such as hydrogen, methanol and ammonia from the US. These fuels use natural gas as a feedstock.
In many cases, it is only though a complete natural gas certified supply chain – meaning participation from all segments – that well-to-gate emission targets can be achieved. For example, hydrogen producers seeking 45V tax credits must demonstrate – at minimum – a 4kgCO2e/kg H2 carbon intensity (assuming a 100yr GWP). For hydrogen producers using natural gas as feedstock – which currently make up over 90% of hydrogen generated today – use of carbon capture can only help them get half of the way to this target. Because midstream emissions can be responsible for 1.2% methane leakage for average pipeline quality gas, they must source additional certified emissions from the gathering, boosting, processing and transmission segments to reach their goals.
Now that there is a large and growing supply of certified gas from the production sector, it is up to natural gas buyers to recognize the critical impact of full supply chain emissions on their purchases. This means demanding measured, audited and certified emissions from the gathering and boosting operators, transmission and storage pipeline operators, and gas liquefaction companies to verify their emissions’ footprint. In the absence of these checks and balances, end users must rely on incomplete data – and likely higher methane gas where certification is lacking.
Interdependent market participants who collaborate with one another to accelerate decarbonization will be vital to the success of making natural gas a fuel of the future, but there isn’t time to wait. It’s in all our interests to demonstrate emission reductions across the entire supply chain as soon as possible.
[2] Jeff Rutherford, Josh Romo, Thomas Fox, Lara Owens: The MiQ-Highwood IndexÔ: A national-scale measurement-informed methane intensity for the United States, June 2023. https://miq.org/miq-highwood-index/
[1] Based on carbon-dioxide equivalents. Source: U.S. Environmental Protection Agency, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2020, Table ES-2, April 2022