Ammonia production is essential to agriculture production, used as a fertilizer. Anhydrous ammonia, a gas, is injected into farmland to enhance the soil with nitrogen. As a boy I remember driving a tractor to fertilize with it.
Ammonia production also uses huge amounts of energy. It is created by transforming nitrogen (N2) into ammonia (NH3) by reaction with hydrogen. The source of that energy is typically natural gas. Burning natural gas, of course, creates carbon dioxide, a greenhouse gas. IEA estimates world CO2 emissions from ammonia production in 2022 were 450 million tons.
But natural gas emitted in the atmosphere is a much more potent greenhouse gas – 80 times more potent than CO2. So producers of ammonia are seeking ways to lower their “carbon footprint” – the emissions of CO2 and methane resulting from its manufacture. This leads us to “differentiated” natural gas.
Large amounts of methane are emitted or leaked into the atmosphere during the production, processing and transportation of the gas. The International Energy Agency (IEA) estimates that in 2019 world emissions from gas production and transportation totaled 80 million tons. Recently E&P companies have made efforts to reduce those emissions.
Two companies have emerged in the market to “certify” that an E&P company has successfully implemented actions to reduce its emissions: MiQ and Project Canary. Both have rigorous certification programs that rate E&P companies on a scale and on their “methane intensity”—how much of their production is emitted, expressed as a percentage of methane produced. Major companies like BP have obtained certification for their differentiated/certified gas. BP has obtained a certification from MiQ for gas produced from its Haynesville shale, Eagle Ford and Permian gas production of grade “A”, meaning that its gas wells are subject to quarterly monitoring at the facility and source level and have a methane intensity rating of 0.05% or less.
This year CF Industries, a giant producer of ammonia, agreed to buy 2.2 Bcf of MiQ-certified low-emissions natural gas from BP in 2023. MiQ says A-rated certified gas used to produce ammonia will reduce the ammonia producer’s gas supply chain-related emissions by 90% and will reduce the lifecycle carbon intensity of ammonia production by up to 20%. If in addition the ammonia producer captures CO2 from its plant and stores it underground in a CCUS facility, the carbon footprint of its ammonia production could be reduce by up to 94%.
Other users of methane also are interested in purchasing differentiated gas: Bloom Energy, which operates natural gas-based fuel cell power plants, is buying differentiated gas from EQT Corp., the largest gas producer in the US. EQT has reduced its upstream methane intensity to 0.038%. The US average is 1.1%.
European LNG importers are also interested in buying differentiated gas from US suppliers.
What do E&P companies gain from having their gas certified? Reducing emissions means more gas is sold; differentiated gas sells at a few cents more; and the companies can say they are doing their part to fight climate change. Purchasers of differentiated gas likewise are able to report reductions in their carbon footprint and satisfy their customers concerned about climate change. In effect, the market has done what regulators struggled to achieve: reduced leaks of methane.