Xpansiv: the data-driven approach to making natural gas supply cleaner
Xpansiv serves as a global market infrastructure provider for registering, managing, trading, settling, retiring, analysing, and reporting an infinite array of data-driven environmental commodities. Jeff Cohen, Xpansiv’s director for sustainability, discusses with Gas Pathways the company’s contribution towards reducing the environmental footprint of natural gas supply.By Mike Weber
Q: It’s been almost two years since Xpansiv completed its first Digital Natural Gas (DNG) transaction through the Xpansiv Registry. How is this breakthrough aiding the oil and gas sector in reducing methane emissions and playing a bigger role in the energy transition?
A: Since introducing Digital Natural Gas and the Digital Fuels Registry, there has been a dramatic rise in efforts to certify the environmental credentials, including methane emissions, of natural gas produced in the US and Canada. Through its partnerships both directly with producers and with certification standards, including Equitable Origin, Project Canary/IES, Xpansiv is on pace to register approximately 1.5 bcf/day of Canadian production, which represents nearly 9% of Canadian production (~1bn ft3/day) and onboarding Appalachian and Haynesville production out of US. This reflects a significant level of commitment by the industry both for transparent accountability as well as growing incentives for optimising operations to control methane emissions.
Jeff Cohen, director for sustainability at Xpansiv.
Q: The agreement on international carbon accounting rules reached at COP26 provided a framework for establishing price transparency in global carbon markets. Tell us about your work with S&P Global Platts on the development and distribution of assessed daily closing prices for voluntary carbon market instruments?
A: Xpansiv’s VCM exchange platform represents the most comprehensive transparent market data set available, both by number of transactions, bids and offers on the electronic marketplace as well as the total volume of offsets that are cleared on the platform via data that can be obtained from the exchange via our data services. All told, approximately 120mn metric tons have transacted via Xpansiv’s platform in each of 2021 and 2022. For the electronic market, Xpansiv has contracted with S&P Global Commodity Insights (formerly Platts) division to settle the Xpansiv standardised instrument contract spot pricing each day (the “GEO-contracts,” including GEO, N-GEO, C-GEO, and SD-GEO). Xpansiv sends over the bids/offers and transactions on the platform each day, and S&P returns a daily price assessment of the data which is then posted as the “market close” price for each of those contracts. Xpansiv entered this arrangement with S&P to get the benefit of S&P’s pricing team’s adherence to the IOSCO principles for pricing commodity benchmarks. These IOSCO principles are a major element in keeping trust in the markets on the proper spot contract value being assessed each day. By virtue of these IOSCO principles being met, Xpansiv is also able to be the monthly settlement price for the CME Group’s complex of futures contracts, e.g. CME’s “CBL GEO Futures,” all of which are defined as settling spot price contracts for delivery. Xpansiv’s approach to this process is fully in line with what is achieved in physical commodity spot markets, e.g., including wheat, crude oil, and natural gas.
Q: Specifically with regards to the Methane Performance Benchmark in the natural gas market that you launched near the end of 2021 in collaboration with S&P Global Platts, how is it a game-changer for US producers and buyers of US natural gas?
A: We were fairly aggressive in designing the initial product which provides a financial incentive for superior methane emissions performance. In our launch of Methane Performance Certificates, we established in partnership with S&P Global Platts a “benchmark” for upstream methane emission intensity of 0.10%. Various industry and government initiatives have set goals ranging from 0.20% (e.g., U.S. Inflation Reduction Act, proposed EU Methane Regulation) to approximately 0.28% (ONE Future). Platts publishes a daily end of day MPC price that brings a level of price transparency for low methane natural gas.
Q: Renewable Energy Certificates (RECs) have at times been criticised due to claims of double-counting. Explain to us how your Methane Performance Certificates (MPCs) are helping to eliminate double counting?
A: A primary focus of the Digital Fuels Registry is to provide markets with absolute assurance that any environmental claims associated with registered natural gas or any other energy commodity (oil, hydrogen, methanol, aviation fuel) cannot be double counted. Methane Performance Certificates are generated and registered as immutable and auditable digitised representations of specific units of physical gas (DNGs), and when transacted, they are permanently retired (“corrupted” in digital speak) in producer’s accounts.
Q: If we are going to get to net-zero, addressing claims of greenwashing and rooting it out will be critical. How are registries helping to eliminate greenwashing and create more trust and transparency in the natural gas sector?
A: In addition to preventing any risk of double counting, our focus from the start has been on creating an end-to-end market channel for high quality, empirical data (both production data as well as supplemental environmental monitoring), third-party verifications and third-party certifications, and audibility back to the source. Digital Fuels is an outgrowth of our extensive experience in carbon markets and RECs, with keen awareness and commitment to providing all participants and stakeholders with maximum transparency and verifiability.
Q: There’s a lot of enthusiasm around blockchain and its potential to transform financial reporting and auditing for oil and gas companies. Can you explain how blockchain is being utilised in registries?
A: Xpansiv including the Digital Fuels Registry employs selective aspects of distributed ledger technology to track the full lifecycle of DNGs, MPCs, and the other environmental commodities that will emerge in other energy sectors.
Q: Technology advancements have been at the heart of the progress registries have made in the natural gas market. Can you tell us about some of the most recent technological advancements Xpansiv is utilising to improve registries?
A: Optimal Registries offer Gas and LCFS programs the ability to capture key environmental attributes like Carbon Intensity and Methane Intensity scores by time interval coupled with baseline conversion factor formulaic issuance capabilities. Xpansiv now offers a standardised “platform” that allows small/mid-size programs as shared platforms to market their schematics. In addition, capturing dMRV in asset creation and access to CBL marketplace through a robust API offering.
Q: For investors and lenders ESG considerations have surged in importance. Can you explain for us how your recent partnership with T-REX platform will directly tie energy transition finance to climate performance metrics?
A: The partnership enables banks, insurance companies, supply chains, regulators and ultimately consumers to directly access key environmental performance metrics – grounded in high quality, empirical, and verifiable data – in making climate and other impact-oriented investment, insurance, procurement, and other decisions.
Q: What’s next for registries in the natural gas sector? How do you see registries for natural gas and Responsibly Sourced Gas (RSG) evolving in the future?
A: Governments and industry have prioritised controlling methane emissions and have set aggressive goals that we think will drive demand for natural gas produced with reduced methane emissions intensity. Demand for “low methane”, or RSG, or “certified gas” will in turn require robust market infrastructure including registries along with the high-quality monitoring, reporting and verification systems and standards that we are seeing today. Xpansiv has created a foundation for energy producers and end-use buyers, along with protocol administrators, data providers, verifiers, and certification bodies to help accelerate the low-carbon, clean energy transition.