Methane reduction was one of our focus themes in 2024, and we expect that to continue into 2025 and beyond.
Curbing methane emissions ranks as one of the most effective actions that can be taken to speed the transition to a low-carbon economy. About a year ago, we wrote the following:
Methane is a potent greenhouse gas that has up to 80 times the impact of CO2 when it comes to warming the atmosphere, and the oil and gas sector is one of North America’s biggest sources of methane emissions. However, reducing methane emissions is also one of the most cost-effective reduction activities for the industry—so much so that certain abatement strategies can essentially be revenue positive. Methane is a key component of natural gas, so every molecule of methane kept from the atmosphere has an inherent financial value that can be realized.[1]
So, what is NEI doing to help reduce methane emissions? Our primary effort to date has been to encourage the oil and gas companies we invest in to join the Oil & Gas Methane Partnership (OGMP) 2.0. OGMP 2.0 is a not-for-profit initiative run by the United Nations Environment Programme. In the words of the UN, OGMP 2.0 is “the only comprehensive, measurement-based international reporting framework for the sector.”[2] According to the program website, over 140 companies with operations in more than 70 countries have joined – but only one from Canada. We are strong proponents of OGMP 2.0 because it provides a full-scope reporting framework, and there is a deep commitment to accuracy and transparency. It also serves as a network of sharing best practices, including techniques and technologies.
In November 2024 we co-hosted with OGMP 2.0 an in-depth, in-person roundtable in Calgary with a handful of Canadian energy companies and investors. The physical space was provided by BMO Global Asset Management. A United Nations’ representative for OGMP 2.0 flew in from Switzerland, and another joined virtually. The objective was to foster collaboration and discussion, so that companies would feel more comfortable joining up to OGMP 2.0. Representatives from the initiative were there to answer questions and dispel myths, and to open the door to ongoing conversations.
Much of what was discussed was not news to the companies in attendance. The industry is aware there is significant concern over under-reported methane emissions, and that this has negative implications for real-world emissions levels. From an investment perspective, investors want to be confident that the financed emissions they are reporting for regulatory and client purposes are as reliable as possible. Having said that, company representatives acknowledged that it was beneficial to them to hear these perspectives from a collective voice in one room. They also appreciated the access to OGMP 2.0 representatives, and at least one company that we know of followed up later to keep the conversation going.
It was somewhat disheartening to hear from participants that new greenwashing rules put in place by the Competition Bureau in mid 2024 were reducing the willingness to speak freely. A couple of companies declined our invitation to participate, citing the new rules. Added to that is the constantly moving target of federal and provincial energy policies, which are likely to experience even more upheaval in 2025 with a federal election.
One concrete next step that came out of the session was for OGMP 2.0 to put together a follow-up response to questions that came up in the room; we sent that to attendees in mid December. We are also looking into whether OGMP 2.0 can facilitate mentorship-style conversations between existing signatories and those still in consideration mode.
Apart from that event, NEI has been actively engaging with portfolio companies on methane emissions and OGMP 2.0 for some time. In 2023 we sent letters to many of our portfolio companies in the oil and gas sector asking them to consider joining the initiative, and we regularly encourage companies to join when we meet with them for one-on-one engagements. Methane reduction was one of our focus themes in 2024, and we expect that to continue into 2025 and beyond.
[1] https://www.neiinvestments.com/insights/ambitious-methane-proposals-poised-to-have-an-impact.html.
