Digital Fuels Program Launch

Digital Fuels Program Launch

Initial Focus on Natural Gas and Methane Performance

Growing awareness of methane’s contribution to climate change—pound for pound 80 times more potent than carbon dioxide in the near term—was punctuated at COP26 last year when 100+ countries pledged to cut methane emissions by 30% or more by 2030. In parallel, dozens of the world’s largest energy producers continue to make progress toward methane emission reduction goals established in multiple partnership programs (e.g., US EPA Natural Gas STAR, ONE Future, Oil & Gas Methane Partnership 2.0, and the Natural Gas Sustainability Initiative).

As part of its Digital Fuels Program, Xpansiv developed and launched standardized digital assets that enable markets to value natural gas produced with low-methane-emissions intensity:

• Digital Natural Gas® (DNG™) collects and records empirical data associated with individual MMBtus of natural gas production, capturing and verifying provenance and other ESG attributes, including third-party certifications from TrustWell and Equitable Origin.
• Methane Performance Certificates™ (MPCs™) register methane-emissions intensities based on independently validated data taken directly from continuous monitoring at well pads and production facilities.

Rapid Market Uptake

In the first six months of the program, natural gas producers in Canada and the United States onboarded data for more than 53 million MMBtus (46.5 billion cubic feet) onto the Xpansiv DF Registry. 

Buyer interest also grew rapidly. In August, Energir procured EO100™-certified DNG with low-methane-emission intensity, verified by ClearTracker™, as part of its Responsible Procurement of Natural Gas Initiative. Since then, several utilities and downstream participants have purchased DNG with responsible-sourced certifications and MPCs. By the end of 2021, approximately 4,000,000 MMBtu of EO100-certified DNG and 2,000 contracts covering 5,000,000 MPCs had traded. 

Procurement of MPCs empowers downstream customers to support responsibly sourced natural gas, demonstrating quantified progress in meeting methane emission reduction commitments and net-zero goals based on empirical data, auditable back to the source.

MPC and EO100 Transaction Volumes

DNG, MPC, and EO100 Onboarded Volumes

Governance and Quantification Frameworks

In 2021, Xpansiv published two frameworks that underpin the Digital Fuels Program:

• Governance Framework specifies requirements for each element of the Digital Fuels Program, including monitoring, reporting, and verification processes, data-quality thresholds, and digital-asset registration, transactions, and retirement. 
• Quantification Framework delineates how MPCs are calculated by comparing methane-emission rates determined for individual production units (based on continuous onsite monitoring) against an average baseline derived from the most current U.S. Greenhouse Gas Inventory.

Xpansiv Partnerships

Xpansiv has been working with a wide range of market stakeholders and industry partners to build the Digital Fuels Program. 

• S&P Global Platts began publishing a daily assessment of MPCs to bring price transparency for this new market instrument. S&P Global Platts and Xpansiv also collaborated to establish a threshold methane emissions intensity of 0.1% as the initial standard by which producers would qualify for MPCs. 

• Validere helps Xpansiv energy-production customers collect, aggregate, and validate real-time, dynamic data sources into an immutable, auditable digitized record embedded with ESG attributes that can now be integrated into commodity markets. To date, Validere has onboarded and mapped more than 11,000 wells for Xpansiv. Validere also provides Xpansiv with future flexibility to add additional data sources, such as satellite images, which can be expanded to include other commodities.
• Clearstone Engineering’s ClearTracker determines methane-emission intensities and associated uncertainties for each discrete unit of natural gas production, beginning at the well pad. ClearTracker is a software application created from Clearstone’s ClearCALC™, used by the Canadian national and provincial governments since 1992 for calculating greenhouse-gas emissions and other pollutants from upstream oil-and-gas production. The model has been continuously refined over more than 20 years, validated with data from more than 200,000 wells. 
• Project Canary deploys continuous monitoring systems at oil-and-gas facilities and employs advanced analytics that—combined with primary production data onboarded by Xpansiv—provide granular, real-time methane-emission rates tied to discreet units of natural gas. TrustWell™ by Project Canaryis a comprehensive operational and ESG performance certification standard that uses more than 600 data points. The standard is integrated into the Xpansiv Digital Fuels Program to provide additional assurance and demonstration of responsible natural gas production.
• Equitable Origin’s EO100™ is another leading certification standard for responsible natural gas production. EO100 uses multiple ESG performance criteria, including corporate governance, business ethics, Indigenous Peoples’ rights, and impacts on climate change and biodiversity.

Continuing Improvement

The Xpansiv Digital Fuels program is designed to incentivize continuing improvement in responsibly sourced fuels, including meeting the highest possible standards for methane-emission controls in the production of natural gas. 

• The program started with an aggressive initial target using the Platts Intensity Threshold of 0.1%—compared to the estimated US industry average of 0.44% and estimated global average of 1.51%. 
• Natural gas onboarded for MPCs in 2021 had a volume weighted average methane emissions intensity of 0.06%.

Participation in the Digital Fuels Program can also support demonstrating conformance with voluntary and regulatory initiatives. For example, detailed, on-site, bottom-up monitoring in accord with the Digital Fuels Program Governance Framework—combined with top-down direct measurements of methane emissions—would qualify a producer as achieving “Gold Standard” Level 4 or Level 5 reporting under the OGMP 2.0 framework.

Looking ahead to 2022, Xpansiv will continue to evolve the Digital Fuels Program to enable price transparency to support responsibly sourced natural gas. Working with a growing ecosystem of stakeholders and partners, we will empower energy producers and buyers to demonstrate quantifiable progress in meeting methane emission reduction commitments, as well as decarbonization, net-zero, and other ESG goals.

Email digitalfuels@xpansiv.com to receive the Xpansiv Digital Fuels Program Newsletter.