From Business Models to Market Growth

Oil and gas companies continue to demonstrate momentum for low-leakage gas. Companies had certifiers evaluate the methane intensity for over 20% of US marketed gas production in 2024. Despite policy headwinds, these companies continue to improve on methane measurement, reporting, and verification. Over 85% of the 40 largest oil and gas companies that focus on exploration and production (E&Ps) reported their Scope 1 and 2 emissions in 2024, up 21% from 2021.² The number of large E&Ps planning to reduce flaring has also increased since 2021, and the number of E&Ps with methane plans has remained steady.³

Exhibit 1

Operators continue to set climate-related targets or goals, with 78% of the top 40 E&Ps reporting a target or climate goal.

Exhibit 2

Emissions reporting and methane mitigation remain core to staying competitive as companies reduce costs, improve efficiency, and reduce methane waste from their operations.

Gas buyers — from tech companies to heavy industry and utilities — have ambitious climate targets, too. Leading tech companies (also referred to as “hyperscalers”) have set net-zero targets for themselves by 2040, even as they build out data centers with high power consumption needs. Heavy industry is increasingly incentivized to reduce embodied emissions of their products as well as Scope 3 organization-wide emissions. Utilities are confronting methane emissions from the production of the gas burned at natural gas power plants, which make up a significant part of their total greenhouse gas emissions. Procuring low-leakage gas helps address all these challenges and meet climate goals.

Banks provide lines of credit or debt to companies that produce and purchase low-leakage gas. Investors and asset owners own equity or debt of gas producers and gas buyers. Banks, investors, and asset owners value companies that mitigate future regulatory risk, including risk of increased methane regulation. Investors and asset owners also look for companies whose business models are positioned to ensure competitiveness not just today but also in a future that favors low-emissions products, providing a stable investment case. Some investors and asset owners also see strong methane emissions management as an indicator of sound overall operations management.

Following the arrival of independent methane intensity certifiers like MiQ in late 2020, high-performing oil and gas producers began certifying assets across their portfolios leading to growth in low-leakage gas supply. Today, MiQ has evaluated methane intensity at facilities representing nearly 25 billion cubic feet per day (Bcf/d), but demand for low-leakage gas has stalled.

Oil and gas producers have shifted priorities. E&Ps’ attention to methane emissions reduction opportunities peaked in 2022 when 46% of all oil and gas producers surveyed by the Dallas Fed indicated plans to curb methane emissions. While corporate consolidation could offer a partial explanation, the number of E&Ps looking to abate methane emissions has declined since 2022. In the 2024 survey, only 35% of producers had methane emissions reduction plans.⁴ Nevertheless, large operators who have already invested in methane abatement technologies are following through with their plans. However, the economic business case is less clear for smaller operators who are yet to begin methane mitigation efforts. Many operators are looking for a demand signal before investing further.

Exhibit 3

The uneven regulatory landscape further complicates the adoption of methane mitigation practices. Since mid-2024, climate action across public and private institutions has slowed. Governments have amended their policy ambitions and have focused on streamlining existing regulations, such as in the EU, or pulling back regulatory levers altogether, as in the United States. The EU’s Methane Emissions Regulations (EU MER) is a significant regulatory compliance signal. While US state-level policy could change the domestic regulatory landscape as well, the best opportunity for near-term growth in the US is voluntary market demand for low-leakage gas. Yet, potential buyers remain hesitant for a multitude of reasons, discussed below.

Several factors have prevented buyers from paying for low-leakage gas. Many buyers:

1. Are not sufficiently aware of the sources and amount of methane emissions in their supply chains;

2. Lack confidence in certifiers and certification standards and protocols; or

3. Perceive a disconnect between low-leakage gas purchases and credible emission-reduction claims.

For E&Ps, methane leaks (and therefore abatement opportunities) occur in Scope 1 categories, where the corporate entity has the most visibility and control. Similarly, buyers focus on their own Scope 1 and 2 emissions where they have visibility or control. However, buyers’ Scope 3 emissions from upstream gas production drives most of the methane emissions in their supply chains. Awareness around the sources and volume of methane emitted from a buyer’s supply chain can help inform its emissions goals. Buyers’ current lack of awareness drives uncertainty of how and to what extent low-leakage gas can meaningfully reduce their emissions profile.

Buyers often lack confidence in the players offering certification standards and protocols. In the early years of gas certification, for-profit certifiers played a prominent role in establishing low-leakage standards. Over time, critiques emerged over the certifiers’ independence and methodology. Eventually, mistrust toward for-profit certification providers spread throughout the low-leakage gas market. Even though today’s leading certifiers are nonprofits and have demonstrated their independence, generalized distrust in the market remains.

There is also a lack of recognized mechanisms allowing buyers to count upstream emissions reductions under current carbon accounting protocols. For buyers, the methane abated at an E&P’s production facility is a Scope 3 activity, which can’t be credibly claimed under existing carbon accounting protocols. Moreover, buyers often need to report the full supply chain emissions of the gas they source, not just emissions leaks at the production (or upstream) site.

Due to these limitations, many buyers are unwilling to pay a premium. These buyers see any price above the lowest cost source of gas as too expensive if benefits cannot be clearly reported. This disincentivizes E&Ps from implementing more costly methane abatement measures, especially for oil-directed assets or older fields.

The market needs to incentivize gas purchasers to prioritize low-leakage gas. E&Ps cannot justify further voluntary investment in methane mitigation without low-leakage gas demand from purchasers. Many operators see value in proving up low-leakage gas production to show market leadership, minimize operational waste, increase efficiency, and learn and implement best industry practices. Nevertheless, suppliers need to see a market signal that their efforts will be rewarded with incrementally higher revenue before dedicating further resources to methane monitoring and abatement. Without buyers, the market will not get off the ground.

Unlocking demand for low-leakage gas means understanding how that gas fits into the business models of gas suppliers and gas buyers. Section 2 outlines the types of companies that produce and transport gas. Section 3 outlines the types of companies that purchase gas. Each player’s revenue model, risk profile, and sales patterns help inform how to successfully scale low-leakage gas.