Carbon Intensity Variation in U.S. Basins and Gas Markets: Methane Mitigation is Key and New Initiatives to Keep Track

 

     When it comes to carbon intensity, not all U.S. basins are equal. There are several reasons for this. Dry gas plays are easier to mitigate for methane since methane dissolved in oil and condensate does not need to be considered. Gas flaring is confined mainly to oil plays. The 2021 graph below from Rystad shows the variation in carbon intensity among U.S. shale oil & gas basins. I added the indicators to the graph.

 

 

US Basins: Upstream Scope 1 CO2 emissions intensity. Adapted from Rystad (2021)

 

     Platts, a part of S&P Global Commodity Insights recently announced a launch of monthly carbon intensity measurements for eight market locations in the U.S. These will serve as a measure for what would probably be considered to be a voluntary carbon market since it includes “associated carbon-accounted price assessments.” This effort is another in a series of emissions benchmarking protocols across the industry. Kevin Birn, Global Head of Center of Emissions Excellence, S&P Global Commodity Insights, said: "We're excited to be offering our clients and the marketplace this truly unique assembly of carbon intensity insight that brings transparency to carbon across the value chain of natural gas -- from upstream production, gathering and boosting, and gas processing, to transport and amalgamation into market hubs. Not only is the offering unparalleled in detail and complexity, but it enables and facilitates the benchmarking of carbon and aids its incorporation into asset and commodity valuations."

     The different market hubs can be seen in the graph below. They represent blends from multiple basins but still reflect the main basin of origin in some cases. For instance, the low emissions intensity of Eastern Gas South reflects the low emissions intensity of the Marcellus and Utica regions which are mainly dry gas plays. S&P Global notes: “Lowest carbon-intensity locations are those with shorter transport distances from basin to hub, less processing requirements (i.e., dry sweet gas) and lower methane emissions throughout the supply chain.” They also note that emissions intensity will vary over time and can vary dramatically by company.  They will also publish “a daily associated carbon-accounted natural gas price assessment for each location, expressed in US dollars per MMBtu, and using the Platts Carbon Removal Credit Assessment (Platts CRC).” These efforts will bring and keep emissions intensity into clear focus.

 

 

 Source: S&P Global 

     In the U.S. an EPA fine on methane emissions is expected to go into effect in 2024 at $900 per metric ton emitted, increasing to $1200 per metric ton in 2025, and $1500 per metric ton in 2026.

 

 

Source: Center for Strategic and International Studies

 

Measurement, reporting, monitoring, and verification efforts have been undertaken for a few years now as part of the responsible gas or certified gas protocols. This can be difficult due to the variability of sources and rates of methane leakage from upstream to downstream in the industry. Leaks can also be intermittent. Gas Technology Institute’s Veritas protocol is developing industry standards for comparable measurement. Verification is by direct field measurements, many with continuous monitoring. Certification is mainly through the MiQ certification standard that has been widely adopted. Methane emissions are also double-checked with independent third-party satellite data from government agencies and environmental groups like the Environmental Defense Fund (EDF), which has launched satellites to measure methane emissions globally with good resolution.

     Meanwhile, the E.U. has just reached an agreement to reduce methane emissions from the oil & gas and coal sectors within the E.U. This requires companies to “properly measure, monitor, report and verify their methane emissions according to the highest monitoring standards, and take action to reduce them”. The same requirements for imports are expected to go into effect in 2027. This does not bode well for countries like Russia. While Russia’s pipeline-imported gas volumes to the E.U. are now very low, their LNG exports to the E.U. have risen by significant amounts. Russia is known to have high methane emissions and is not expected to be a fair player in emissions reductions. Since LNG has a significantly higher carbon intensity than pipelined gas, this has resulted in emissions rising in the E.U. due to the increase in LNG imports to Europe from the U.S., Russia, and elsewhere. Previously stated goals are to reduce methane emissions globally by 30% by 2030. This is likely achievable, at least among responsible countries. One issue that could cause problems is aging infrastructure which is more prone to leaking. Countries such as Russia, Ukraine, Turkmenistan, and Azerbaijan have this problem. That makes it more expensive for them to come into compliance. EDF’s European division estimated that the E.U.’s LNG carbon footprint is about 8 times higher than its domestic footprint.  

     Thus, one can see that the Russian invasion of Ukraine disrupted European decarbonization plans in many ways: increase of LNG/reduction of pipelined gas, the blowing up of the Nordstream gas pipeline which resulted in significant releases of methane directly into the atmosphere, and the higher costs of energy which took away spending that could have been applied to decarbonization efforts, and exacerbated inflation.  

 

References:

A gas boom is coming in the US, a closer look at Haynesville and Appalachia reveals records and a risk. Rystad Energy. April 22, 2021.  Rystad Energy - A gas boom is coming in the US; a closer look at Haynesville and Appalachia reveals records and a risk

 S&P Global Commodity Insights Launches Carbon Intensity Measures & Carbon-Accounted Price Assessments for North America Natural Gas Markets. S& P Global. November 15, 2023. S&P Global Commodity Insights Launches Carbon Intensity Measures & Carbon-Accounted Price Assessments for North America Natural Gas Markets | S&P Global Commodity Insights (spglobal.com)

EPA’s Methane Rulemaking Timeline. Harvard Environmental & Energy Law Program. July 13, 2023. EPA’s Methane Rulemaking Timeline - Harvard Law School

How to Cut Methane Emissions from Global Gas. Ben Cahill & Arvind Ravikumar. Center for Strategic and International Studies. November 14, 2023. How to Cut Methane Emissions from Global Gas (csis.org)

Oil and gas industry jittery as EU nears deal on methane leakage. Nikolaus J. Kurmayer. Euractiv.com. November 13, 2023. Oil and gas industry jittery as EU nears deal on methane leakage – EURACTIV.com

EU reaches deal to reduce methane gas emissions from energy sector. AP. The Irish News. November 15, 2023. EU reaches deal to reduce methane gas emissions from energy sector (msn.com)

GTI Energy's Methane Emissions Measurement and Verification Initiative. Gas Technology Institute. Veritas: GTI Energy's Methane Emissions Measurement and Verification Initiative • GTI Energy