U.S. controls on planet-warming emissions, investor pressure on climate risks, and strict climate policies in end-user markets could force U.S. oil and gas companies to find new ways to market themselves in the energy transition.
A critical part of the oil and gas sector rising to the environmental, social and governance challenges that it faces will be getting a better handle on its emissions footprint throughout the oil and gas supply chain. Transparency in reporting emissions numbers will be central to this effort, according to an Oct. 12 panel of industry experts at the LDC Gas Forums' Gulf Coast Energy Forum in New Orleans.
"It's essentially giving the consumers the right or the ability to know what they are buying," said Fletcher Sturm, vice president of market development at the ESG-related commodities platform Xpansiv Ltd. "It's a need-to-know market at this point."
Members of the U.S. LNG sector have begun responding to concerns over greenhouse gas emissions in the natural gas supply chain by competing to offer the cleanest supplies. Cheniere Energy Inc., the top LNG exporter in the U.S., has launched a series of climate initiatives focused on measuring the emissions from wellhead to delivery point of gas associated with its LNG. Part of the idea is that customers could use the emissions tags to purchase offsets. But Cheniere executives have also said offsets are secondary to mitigation efforts, which could also be helped by developing a baseline for life-cycle emissions.
"Where we are headed is that gas is going to be judged on its total life-cycle emissions," said Paul Bledsoe, president of the public policy firm Bledsoe & Associates LLC. Bledsoe was speaking at a separate Oct. 13 Texas Energy Day event hosted by the Port of Corpus Christi. "[The U.S. industry] can show that those emissions will be much lower than coal and that U.S. gas then will be lower than our competitors, including Russia especially, which has an incredibly high fugitive emissions rate."
The increased value of the environmental footprint could lead to premiums for cleaner supplies of both LNG sold to global markets and domestic gas supplies traded in the U.S., the experts at the New Orleans event said. One innovation Sturm emphasized was responsibly sourced gas development, which generally involves certification by an independent third party as meeting certain ESG standards. Methane emissions are often a key metric in certification.
So far, 2021 has seen a surge in commitments from upstream companies to certify their production. A mature market developing for certified gas supplies could take time, with voluntary certification frameworks a relatively new development, but certificates for the responsibly sourced gas could be traded separately from the underlying commodity, panelists said.
Products are also available that can provide a digital record for a specific unit of natural gas production at the wellhead. So-called "digital natural gas" offers information on methane leaks and the water intensity and the physical characteristics of the well.
Beyond quantifying emissions, emerging technologies can be used to improve the life-cycle emissions of U.S. gas, including hydrogen blending in pipelines, waste recovery that can power electrolysis for hydrogen production, and small-scale LNG facilities that can move gas supplies in remote areas with poor access to pipelines.
"There's absolutely no reason to flare or vent natural gas or otherwise waste natural gas," said Sean Jump, a senior manager at consulting firm Sia Partners. "There are solutions out there in the marketplace where you can capture and use it."