European utilities seeking to diversify away from Russian natural gas imports while maintaining environmental priorities are taking the first steps toward testing out third-party US certified gas as a potential solution.

Producer certified gas, also known as responsible natural gas, or RSG, is natural gas production that has been independently assessed as meeting minimum environmental, social, and governance standards, often with an emphasis on lowering methane emissions.

The North American arm of Uniper, a German multinational energy company, signed a multiyear purchase agreement to buy an undisclosed volume of certified gas from US producer Southwestern Energy, the companies said June 14. Uniper’s US midstream gas portfolio supplies gas to both domestic customers and to liquefaction and export facilities, including Freeport LNG in Texas.

Uniper’s counterparty, Southwestern Energy, completed third-party certification of approximately 3 Bcf/d of Marcellus gas production in the first quarter of 2022 and has plans to undergo certification for its Haynesville production by the end of the year. The producer partnered with Denver-based environmental assessment firm Project Canary to certify the entirety of its production in both basins, a process that includes the installation of continuous monitoring sensors to capture methane emissions data.

“Transparency in energy production practices is a growing market interest, and agreements like this one are key to deploying responsibly sourced solutions for customers in the U.S. and abroad,” Uniper North America CEO Marc Merrill said in a June 14 statement.

European first movers

While third-party natural gas certification has taken off among US gas producers, with more than 20 Bcf/d of gas set to be certified by the end of the year, according to public commitments, activity in the demand side for this product has been slower to appear. Just a handful of US end users have committed to purchasing certified gas so far, with regulated utilities pointing to the lack of a standard definition and the need for public utility commission approval to pass along additional costs to ratepayers.

European multinational utilities have been some of the first movers in the demand space, with Uniper joining France’s Engie in publicly purchasing US certified gas.

In early May, Engie signed a 15-year LNG purchase agreement with the proposed Rio Grande LNG facility, which has committed to sourcing certified gas as feedgas. In February, Engie made public a deal to buy certified gas from Appalachia producer Range Resources.

With the market design for certified gas still uncertain, tools like Engie’s digital registry — The Energy Origin — that span both Europe and the US, could facilitate transatlantic certificate trading.

Balancing act

Purchasing certified gas for liquefaction could be one route for European utilities to balance the need for greater volumes of LNG imports with staying true to ambitious energy transition goals.

In Uniper’s case, the opportunity to test this strategy is amplified by its offtake capacity at Freeport LNG and the company’s central role in developing German LNG import capacity.

In 2015, Uniper signed a 20-year contract with Freeport LNG for the right to export approximately 0.9 MTPA of free-on-board LNG. Freeport’s typical contract structure involves tolling agreements, where buyers are responsible for supplying the feedgas and power used. This structure provides a path for offtakers to source certified gas, should they so choose.

While a June 8 fire at Freeport LNG has taken the facility temporarily offline for repairs, the multiyear nature of Uniper’s deal with Southwestern still makes the sourcing of certified gas for LNG exports a possibility.

Uniper will also build and operate Germany’s first LNG import terminal at Wilhelmshaven, as well as operate two floating storage and regasification units on behalf of the federal government, the company announced May 5.

German utilities have been under pressure to quickly find alternatives to Russian gas since the start of the Ukraine conflict. With the construction of permanent onshore LNG regasification facilities requiring longer timelines than the situation permits, the German government has made federal funds available for the leasing of four floating storage and regasification units, including the two that Uniper will operate. German lawmakers also passed a bill in late May that will streamline the approval process for new LNG import terminals, including temporarily limiting the requirements for environmental impact assessments, which has raised the ire of green groups.
Source: Platts