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EQT sets 2025 net-zero goal with RSG, carbon offsets, blue hydrogen

Highlights

Intends to explore market creation opportunities

Will replace all pneumatic devices by 2023

Appalachian bellwether producer EQT plans to spend $75 million on a series of aggressive sustainability goals, including reaching net-zero emissions by 2025, company executives said June 30.

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The US' largest natural gas producer, EQT also pledged to reduce greenhouse gas emissions intensity by 70% by or before 2025, with a special emphasis on reducing methane emissions intensity by 65% by 2025.

In a call with investors, EQT executives made it clear that gas will continue to be the foundation of the company's business going forward, spelling out an intent to explore gas-based climate solutions like responsibly sourced gas, blue hydrogen and carbon offsets.

EQT President and CEO Toby Rice made sustainability a central theme in his formal remarks, a dual definition referring to both climate goals and corporate profitability. By consolidating acreage in naturally low-emissions Appalachia and pursuing new ventures like RSG and blue hydrogen, EQT says it positions itself to benefit from future carbon pricing and insulate itself from regulatory risk.

David Khani, EQT's CFO, elaborated on this strategy, emphasizing the delta between EQT's low-emissions gas and the average US gas molecule.

"That delta is going to get wider, and so you are going to take the tons [of carbon emissions] that you effectively are saving by taking our gas and then you're going to multiply it by the price of carbon," Khani said. "You can imagine, over time, carbon prices go up and the value of our RSG is going to go up as well."

Responsibly Sourced Gas

EQT's announced $75 million sustainability budget, which is to be spread over five years, includes planned spending of around $20 million to replace all pneumatic devices by 2023.

"When we started diving deeply into our emissions footprint after stepping into the company, we found that natural gas pneumatics were the source of a majority of our GHG emissions and substantially all of our methane emissions, and they are replaceable," Rice said.

Data from the US Environmental Protection Agency's Greenhouse Gas Reporting Program reveals pneumatic devices to be the biggest source of methane emissions in onshore oil and gas production, responsible for 25 million mt of carbon dioxide equivalent in 2019.

Many of the pumps and controllers used in upstream gas production are pneumatic in design, which means they are powered by pressurized gas. Pneumatic devices vent gas as part of daily operations, making them a central focus point for producers looking to reduce methane emissions.

"Zero-bleed" alternatives to pneumatics include instrument air systems that pressurize ambient air and electric pumps and controllers powered by either solar energy or electricity from the grid.

Phasing out pneumatic devices should be a major boon to EQT's positioning as a leading RSG producer. The company has inked a series of RSG certification partnerships and pilot programs, most recently with a consortium helmed by the US' top LNG producer, Cheniere Energy, in mid-June. Prior to that, EQT announced in May that they would work with Equitable Origin and MiQ to certify more than 200 well pads in Southwestern Pennsylvania. A smaller certification and continuous monitoring pilot was announced in January with Project Canary.

Carbon offsets

While the pneumatics replacement program, along with efforts to maximize uptime and convert previously diesel-based frac crews to run on electricity, will go a long way towards reducing EQT's annual emissions, Rice acknowledged that these steps alone would not get the company to net-zero.

To close the gap, EQT plans to apply for afforestation and modern land management carbon offset certifications, highlighting its 1.8 million acre footprint in rural Appalachia as a potential source.

William Jordan, EQT's executive vice president, clarified in analyst Q&A that any carbon offsets that the company generated would not be monetized, instead going to offset EQT's own difficult-to-abate emissions.

Blue hydrogen

Hydrogen produced from gas with carbon capture and storage, also known as "blue hydrogen," is also part of EQT's new ventures strategy.

Rice attributed his optimism on the topic to EQT's relatively low-cost resource base and the company's access to existing depleted wellbores for CO2 injection.

"We're leaning in on leveraging proven technology," he said. "It's not going to be a technological stretch there."