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Commodities 2022: First US LNG cargo from certified gas could set sail

Highlights

30% of Haynesville gas to be third-party certified by mid-2022

Industry explores ideas for 'greener' cargoes

Third-party gas certification that took off in 2021, particularly in the Haynesville Shale in Louisiana and East Texas, could lead to the first certified gas US LNG export cargo in 2022, market watchers say.

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The first US LNG cargo sourced entirely from certified gas could set sail as early as the second quarter of 2022, according to Project Canary CEO Chris Romer.

"I think next year LNG buyers are going to start insisting on the methane intensity being measured at the well level, pad level, compressor station, all the way through to it being put on a ship and delivered to that foreign hub," Romer said in a Dec. 14 telephone interview.

Emmanuel Corral, a low-carbon gas analyst with S&P Global Platts Analytics, has also predicted the first certified gas US LNG cargo in 2022. "The more companies jump on this movement, the more confidence I gain that it will happen," Corral said.

Haynesville Shale

Producers, as of Dec. 28, had publicly committed to undergoing certification for 4.2 Bcf/d, or 30%, of the Haynesville Shale's current gas production by mid-2022. Just over half of that is on schedule to be completed by the end of 2021.

Flaring is less common in the Haynesville Shale, a dry play, than in more liquids-rich basins, and that, combined with the basin's naturally lower emissions profile, has made certification an attractive proposition for operators.

Publicly announced Haynesville certified gas commitments
Company
Amount of production
Certification commitment
Expected completion
Certification
Chesapeake Energy
100%
1 Bcf/d
Q4 2021
MiQ, Equitable Origin
Chesapeake Energy (Vine)
100%
1 Bcf/d
Q4 2021
Project Canary, TrustWell Standard
BPX Energy
N/A
0.2 Bcf/d
Q4 2021
MiQ
Comstock Resources
100%
2 Bcf/d
Q2 2022
MiQ
GEP Haynesville (pending Southwestern Energy acquisition)
N/A
Not disclosed (pilot)
Not disclosed
Project Canary, TrustWell Standard
TG Natural Resources
N/A
Not disclosed (pilot)
Not disclosed
Project Canary, TrustWell Standard
Chesapeake Energy
N/A
Not disclosed (pilot)
Not disclosed
Project Canary, TrustWell Standard

Part of the appeal in gas certification in the Haynesville Shale is the basin's proximity to the bulk of existing and proposed US LNG export terminals along the Gulf Coast, especially as midstream operators begin to offer ways to move gas molecules directly to exporters.

The CEO of DT Midstream said in September that the gathering and midstream company would build a "wellhead-to-water carbon neutral pathway" to move Haynesville gas south to Gillis Hub. The project "supports international domestic market desire for low carbon LNG exports," according to a Nov. 5 DT Midstream presentation to investors.

The quest for 'greener' LNG

The global LNG industry has tested different solutions to address importers' apprehensions around emissions in recent years, ranging from carbon offsets to more transparent emissions accounting.

The importance of the efforts increased after November 2020, when a French multinational utility was pressured by environmental groups into canceling negotiations to secure an offtake agreement with a proposed US LNG export facility.

"In the past year, we have seen requests from large LNG buyers to have a trusted end measurement framework for emissions," Tommy Inglesby, upstream and LNG portfolio lead at consulting firm Accenture, wrote in an email to Platts Dec. 14.

Having an established framework "can be used to start pricing in life-cycle emissions and ultimately determine how the market wants to price responsibly sourced LNG," Inglesby said.

Existing and proposed US LNG export projects have started testing emissions measurement framework ideas.

Next Decade's proposed Rio Grande LNG will source its gas from certified production, use "net-zero power" for operations, and pair the liquefaction facility with an on-site carbon capture and storage project, the company's senior vice president for carbon solutions, Patrick Hughes, said in an email.

The operators of Freeport LNG, Calcasieu Pass, and Plaquemines LNG have also announced plans to build carbon capture and storage projects alongside liquefaction facilities.

Sourcing certified gas

US LNG exporters could source certified gas in one of two ways: molecules or certificates. The Haynesville Shale's proximity to LNG export infrastructure raises the possibility of buying tracked certified gas molecules.

Exporters alternatively can purchase certificates representing environmental attributes or emissions profiles, similar to the US electricity market's Renewable Energy Certificates (RECs). Digital registries and exchange listings now exist to facilitate these transactions, including Xpansiv, the MiQ Registry, and COMET.

Platts on Oct. 4 launched daily pricing assessments of Methane Performance Certificates. MPCs are traded separately from physical natural gas, with each certificate representing the production of a specific volume of natural gas at a methane intensity of 0.10% or less. Platts assessed the price of an MPC at $0.048/MPC, or $7.742/mtCO2e, as of Dec. 28.