“Digital Natural Gas”: How this Canadian company is using blockchain to give its natural gas an edge over its rivals

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Amid scrutiny of methane emissions and carbon intensity, energy and utility executives say not all natural gases are created equal – some molecules have a carbon footprint smaller than others.

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Although gas from one producer is indistinguishable from another once it is pumped into a salty storage cavern, Paul Myers is looking for a way to put an environmental footprint on the natural gas his company Pacific Canbriam Energy Ltd. is drilling into the ground. , in an effort to distinguish its molecules from those of its more carbon-intensive rivals.

The Calgary-based president of Pacific Canbriam recently led his company through the arduous process of having an independent third-party audit the company’s emissions intensity, the energy content of its natural gas, its social impact and its governance – or ESG – practices. The company has invested more than $100 million in water recycling initiatives since 2008, attempted to eliminate the use of diesel at its natural gas plant by utilizing flue gases and diverting waste heat for energy, among other initiatives.

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Now he is looking to differentiate the production of Pacific Canbriam.

“There’s a growing focus on where the energy is coming from,” Myers said, noting that companies are under increasing pressure to reduce emissions given climate change concerns. Pacific Canbriam announced on August 31 that New York-based Equitable Origin (EO) had granted the company a sustainability certification called the EO100 Standard for Responsible Energy Development, which legitimizes the company’s (ESG) practices.

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In a further effort to brand how its natural gas is produced, Pacific Canbriam is collaborating with San Francisco-based Xpansiv to create a “digital twin” of its gas, which would be traded on the blockchain and include information about its intensity. of methane, its energy content. , production methods and EO certification.

“How can buyers of this energy be reassured that it is developed in a sustainable way? Myers said, adding that he believes trading in “digital natural gas” alongside physical merchandise would reward customers for purchasing gas produced with lower emissions and greater social impact. “It’s an evolving situation. We’ve known for a long time that customers want transparency. »

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Pacific Canbriam has also signed a one-of-a-kind agreement with Montreal-based Énergir, formerly known as Gaz Métro, to sell both physical natural gas by pipeline and “digital natural gas” on the Digital Fuel Registry. from Xpansiv, which includes an “immutable digital certificate, allowing the owner to retire and claim the digital asset to achieve (environmental, social and governance or ESG) objectives”.

“Customers and stakeholders want to participate in the energy transition, and through this initiative, we are happy to offer sourced natural gas with more transparency, aligned with current ESG thinking”, Vincent Regnault, director of the gas supply and development of renewable gas at Énergir, said in a press release announcing the arrangement.

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Gas companies — both producers and utilities — are increasingly trying to buy and sell what they call “responsibly sourced gas,” or RSG, which is a term recently coined by the industry. to describe natural gas extracted by companies with properly approved ESG practices.

Now, Pacific Canbriam and Énergir hope that the digital gas certificate exchange that meets these standards will provide a receipt for the transaction.

Xpansiv is partly backed by Australian investment bank Macquarie Group Ltd. It currently operates a voluntary carbon market and a water market and now aims to create an “ESG commodity market”.

“Generally an MMBTU is an MMBTU, there really isn’t a price difference for those types of attributes,” said Peter Schriber, vice president of market development at Xpansiv, but added the possibility prove that your fuels are produced to higher standards. possibly allow producers to charge a premium for their natural gas, which is a fungible commodity.

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“If you decide you want to adopt better supply practices, it comes down to consumers wanting to know how their gas was made,” Schriber said. “My certificate can finally be unpacked. I can unpack all of this to production which happened on a certain day.

Currently, the company’s digital fuel ledger focuses on natural gas trading, but Schriber said there is potential to expand its offering to other commodities like crude oil as buyers focus increasingly on emission reductions.

Pacific Canbriam is the second company in Canada to achieve Equitable Origin certification after Seven Generations Energy announced it had been certified in February 2020. Seven Generations has since been sold to ARC Resources Ltd.

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In the United States, a competing ESG certification process led by Denver-based Project Canary is also gaining momentum among gas producers.

“The thing is, there really isn’t an industry standard, as evidenced by the number of agencies providing the service as well as the number of methodologies,” said Dulles Wang, director of research on the gas in North America at Wood Mackenzie in Calgary, adding the ESG-certification industry is still “very nascent”.

Wang said three factors are driving the transition to ESG certification for gas companies. First, utilities like Énergir and Minneapolis-based Xcel Energy are demanding more gas from responsible sources. Second, producers are trying to get ahead of tougher emissions regulations. Third, utilities in foreign export markets are increasingly asking for information about where the gas comes from, how it was produced, and its contribution to global emissions.

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In the case of Pacific Canbriam, EO certification could end up being lucrative for export markets, as Singapore-based parent Pacific Oil and Gas also seeks to build the $1.8 billion Woodfibre LNG project. in Squamish, British Columbia.

Wang said natural gas companies are also obtaining certification from groups such as Project Canary and Equitable Origin in an effort to secure premium prices for their molecules, but there is still little evidence of this.

“Right now the way we view RSG is not an open market. Its price might be different, but since it’s not openly traded, we wouldn’t know,” he said. “There is no price discovery at this time, but we believe the demand is there.”

• Email: [email protected] | Twitter: geoffreymorgan

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