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INTERVIEW: MiQ nears start of issuing methane emissions certificates

Highlights

The first US gas producers allowing methane audits

MiQ offers independent system for grading gas supply

MiQ expanding service to include LNG, pipeline operations

A number of gas producers in the US will soon be issued with certificates that assess their performance on upstream methane emissions under the recently launched MiQ initiative, senior MiQ officials said in an interview with S&P Global Platts.

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MiQ Senior Advisor Georges Tijbosch said the certification of gas supply based on its methane emissions performance was already becoming part of contractual negotiations between sellers and buyers, and could become a key component in global gas trade in the future.

The global not-for-profit MiQ initiative was launched in late 2020 and is designed to allow gas suppliers to differentiate themselves by offering gas with proven lower methane intensity.

It has set up an independent framework that would lead to gas being graded from A to F, depending on the volume of methane emissions at the upstream level.

Since its launch, MiQ has signed on three gas producers in the US -- EQT Corp., Chesapeake Energy Corp., and Northeast Natural Energy (NNE) -- and is in talks with dozens more potential counterparties in the US as well as in Europe and Asia.

Audits by third-party companies are currently being undertaken to assess the methane intensity of facilities operated by the US producers ahead of the certification process.

"We expect the audits to be finished in September or October depending on the different facilities," Tijbosch said. "There will then be quite a big number of certificates entering the markets."

EQT, for example, is the US' biggest gas producer with sales in Q2 of around 4.3 Bcf/d, which Tijbosch said reflected the scale of the certification system.

"There are many others we are having conversations with at the upstream level -- we're speaking to 50-100 counterparties in total," he said.

MiQ has also approved six auditors to carry out the work to assess methane emissions at the facility level.

Producers are expected to pay for the audits of their facilities, but Tijbosch said this would not be prohibitively high.

"We think the audit costs are absolutely reasonable related to the volumes involved. We strongly believe that the cost of the certification -- a combination of the audit and running the registry -- is not going to be a hurdle," he said.

"We're running it as a cost-plus model as we are not-for-profit, and for auditors we are letting the market play," he said.

MiQ is in the process of setting up its certification registry, which will provide the ledger for holding all certificates until they are retired.

"We expect the registry to be fully up and running next month and to issue certificates shortly after," MiQ's commercial manager Tim Marsters said.

"When a producer has a certificate issued, it will be issued into an account and the producer then can transfer that certificate to a buyer's account," Marsters said.

"The certificate can then be retired by an end-user in the registry, and that end-user can get a retirement statement to evidence its lower emissions of the gas it has used," he said.

Next steps

MiQ is also working to expand its service to include certification of methane emissions in midstream operations -- such as LNG delivery and pipelines -- as part of a life-cycle assessment (LCA) process.

"A buyer in France of US LNG, for example, would know the methane emissions at the upstream level and as it is transported until the gas is landed in the consumption area," Tijbosch said.

"The LCA concept is unique and we want to integrate that into the certification," he said.

Part of MiQ's aim is to bring new transparency to methane emissions in the oil and gas industry, and bring a standardized methodology for measuring methane intensity.

"If the grade is a D, it makes sense for a producer to look to improve its grade by fixing the emissions," Tijbosch said.

"The service companies are interested in that, the auditors are interested. It's part of the reason we are doing this. Once you have that transparency -- what you measure is what you manage -- we will see action," he said.

Tijbosch said he hoped European companies would also come on board, though progress has been slower than expected, in part due to the upcoming legislative proposals from the European Commission on methane emissions.

The EC is due to publish its proposals in mid-December alongside its proposed package on the decarbonization of gas.

"Europe has different complexities around methane emissions than the US, with Europe very much an importer," Tijbosch said.

"However, we have recently started to see several players interested and live conversations are ongoing. We hope over the next couple of months to announce pilots and certifications in Europe as well," he said.

Pricing signal

MiQ is also seeing "huge" interest from LNG players, he said, as the trend for contracting "greener" LNG continues to grow.

For LNG buyers, to be able to differentiate the sourced LNG by methane emissions performance will be increasingly important.

"What we are creating is the tradable market, with the A to F grading. It's about creating the pricing transparency," Tijbosch said.

"We're already seeing differences in pricing between what producers are offering versus what others are offering purely based on transparency around methane emissions," he said.

Marsters added: "We are putting in place a framework where buyers can differentiate -- that should drive the price signal to producers."