October 24th, 2021
It seems that hardly a week goes by without another announcement on responsibly sourced natural gas (RSG). Either in response to rising interest among electricity generators, gas-distribution utilities, and gas-consuming industrials in procuring RSG or as proactive moves to boost their own ESG cred, a number of players in the gas sector — from producers to pipeline companies to LNG exporters — have been working to qualify their natural gas, their long-haul pipes, or their liquefaction plants for RSG status. A few producers have also been reaching deals to supply independently verified RSG to the market, with the expectation that at least a subset of gas/LNG buyers will be willing to pay the price premium involved. But all this is relatively new, and there’s still a lot that needs to be sorted out on the RSG front. In today’s RBN blog, we continue our series on RSG with a look at recent announcements and the associated challenges when selling RSG.
Pipeline gas is pipeline gas — a fungible good, a commodity with near-identical characteristics no matter whether it enters a long-haul takeaway pipe in the Marcellus/Utica, the Bakken, the Haynesville, or the Permian. Sure, there are typically small differences in Btu content per cubic foot, but those are accounted for in natural gas’s per-Btu pricing structure. Nowadays, though, with ESG front of mind for many energy industry participants, there’s a lot of interest among upstream, midstream, and downstream players alike in what you might consider an “organic” or “free-range” form of natural gas that is better from an environmental perspective. Admittedly, carbon-neutral gas and RSG still generate greenhouse gases (GHGs), primarily CO2, when they combust. However, it’s also got to be said that by offsetting some or all of those emissions through the purchase of carbon credits (in the case of carbon-neutral gas), or by working to minimize the GHGs, mostly methane, emitted along the value chain (in the case of RSG), the end result is net positive for the climate.
As we said in Part 1, RSG is a higher-end, premium-priced version of a commodity, or more specifically natural gas, that is produced, gathered, processed, transported, and distributed in a way that meets the highest environmental standards and practices. Depending on the entity doing the verifying or the level of “RSG-ness” achieved — Platinum, Gold, or Silver in the case of Project Canary’s TrustWell certification process, for example — it means certainty about things like best-practice well construction, continuous monitoring of methane emissions, quickly fixing leaks, reducing or eliminating gas flaring, and taking steps to minimize negative impacts on air, water, land, and communities.