For one, the technologies that enable producers to monitor oil and gas fields – and thus detect and fix leaks of methane – have continued to advance. At the same time, as utilities and other buyers are seeking to meet their emissions goals, a market has begun to develop for “certified natural gas.” Also called “differentiated gas,” certified gas is natural gas that has been assessed as being produced with effective methane emissions management, and could sell for a premium.
But one thing hasn’t changed: ExxonMobil’s commitment to reduce methane emissions. This week, we announced a pilot project with MiQ to certify about 200 million cubic feet a day of natural gas produced at our Permian Basin facilities at Poker Lake, New Mexico, as early as the fourth quarter this year. We are proud to be the first Permian operator, and the first integrated energy company, to make such an announcement. If markets begin incentivizing lower methane emissions, on top of the regulatory approach we also support, that could be good news for more rapid methane emissions reductions.
While the pilot project is an initial step, it does target more than 10 percent of ExxonMobil’s current natural gas production from the Permian Basin while also providing us with a better understanding of the growing interest in certified gas from a commercial perspective. We are working towards expanding certification to include other Permian Basin production and other shale production areas, including Appalachia and Haynesville.
So how will it work? MiQ, an independent non-profit, has developed a framework whereby an independent auditor assesses a company’s operations at the facility or platform level using the MiQ Standard, and assigns a grade. This approach transparently and consistently assesses the facility for the methane intensity of natural gas (the amount of emissions per volume of gas produced), technology deployment for leak detection and repair, and emissions mitigation practices.
Such a third-party-accredited system benefits both buyers and sellers. Buyers receive an “apples-to-apples” comparison between producers, while sellers obtain a way to credibly market their gas to buyers interested in certified gas. We are excited to launch this certified gas pilot for several reasons.
First, it is a natural extension of our longstanding commitment to reducing methane emissions in our operations. ExxonMobil exceeded its goal to reduce methane emissions by 15 percent by year-end 2020 compared to 2016 levels. We have conducted more than 23,000 methane leak surveys across more than 9,500 sites and eliminated all high-bleed pneumatic devices across our U.S. unconventional production. We also have announced plans to reduce our upstream methane intensity by up to half by 2025 compared to 2016 levels, which is expected to result in a 40 to 50 percent decrease in ExxonMobil’s upstream absolute methane emissions globally.
ExxonMobil is well-positioned to offer certified natural gas to the market. Due to our efforts to minimize emissions in operational design, to develop and deploy new technologies to find and fix fugitive emissions, and to have practices and employee training programs in place that focus on emissions reduction, we expect the certified natural gas production from Poker Lake to receive a competitive grade under the MiQ Standard.
Additionally, while the market for certified gas is only just emerging, it is expected to grow rapidly. Based on our analysis, we anticipate that by year-end 2022, about 10 percent of U.S. natural gas production may be certified in some manner, as buyers such as utility companies increasingly look for opportunities to meet emissions-related goals, both voluntary and mandated.
ExxonMobil continues to believe methane regulations are needed to accelerate industry-wide methane reductions forward. We support the direct federal regulation of industry methane emissions and have offered a regulatory framework that explained the various industry emissions sources and cost-effective methods to control them.
But we also believe that needed change will occur faster if markets are supportive. We are proud to be a leader in this effort.
Bart Cahir is Senior Vice President, Unconventional, ExxonMobil Upstream Oil & Gas Company.