Demethanization: The New Viral Energy Transition Sensation
Decarbonization has become the catch-all term for climate action. But, while carbon dioxide is the biggest contributor to global warming, the case for tough action against methane emissions, known as "demethanization," is literally becoming clearer by the day.
Decarbonization has become the catch-all term for climate action. But, while carbon dioxide is the biggest contributor to global warming, the case for tough action against methane emissions, known as "demethanization," is literally becoming clearer by the day. As satellites and detectors closer to ground train increasingly sophisticated sensors at sources of "the other greenhouse gas," this is lifting the veil on emissions that have long proven more elusive than CO₂.
The US and European Commission announced the Global Methane Pledge on 18 September, which aims to cut global methane emissions by at least 30% from 2020 levels by 2030. While this might seem detrimental to natural gas suppliers, it could be an opportunity to enable growth by becoming part of an interim climate solution. BloombergNEF has explored the largest impacts of demethanization, the challenges ahead, and how concerted action by vested parties could be mutually beneficial.
Demethanization can enable gas operators to sell a differentiated product and capture market share. Almost 60% of global emissions are either on the way to being or are already legislatively covered by some form of net-zero emissions target. Many of these targets have been set by nations that import copious amounts of fossil fuels, especially liquefied natural gas. The role of natural gas in the energy transition is particularly uncertain, and sellers could market zero-methane emissions gas as a product that helps achieve climate goals, expanding their potential customer base, and lengthening their product’s lifespan. They could also sell demethanized gas at a premium, which could improve their bottom line. Responsibly sourced gas could soon be headed to a burner tip near you.
The Global Methane Pledge provides a competitive advantage to the US that may encourage other major gas exporters to sign on. The US is the only pledge signatory that is a major gas exporter, which gives it an advantage over rivals like Russia and Qatar, especially when accessing the lucrative and liquid European gas market. Aligned thinking on emissions makes the EU more likely to deal with the US on future gas import deals, providing an incentive for other exporters to get in on the fun.