Canadian environmental services company Zefiro Methane [Cboe Canada:ZEFI / FRA:Y6B] is a real innovator in the field of emissions abatement that has pioneered a combination of services and markets to create and trade high-quality carbon offsets.
Listed on Cboe Canada in April, what sets Zefiro Methane apart from competitors, although there is no other company quite like it in the methane abatement field, is that its Services unit completes high quality methane abatement offset projects approved by the American Carbon Registry and then bats those methane offsets to the Markets division to monetise them in the carbon markets.
“We are fundamentally an environmental markets and services mission company, and we are doing it in an integrated way that is truly differentiated from what is out there. As a result this provides us the ability to attract capital at scale in ways that companies with some of those same titles are not able to,” said Chief Executive Talal Debs.
- Zefiro Methane completes Pennsylvania’s first well-plugging project under Jobs Act
- Zefiro Methane subsidiary buys stake in well plugging equipment specialist
- Zefiro Methane secures remaining stock of key subsidiary P&G
It all starts with the orphan methane problem, that is, potentially as many as two million abandoned sites dotted across the US that are still leaking methane and other potentially toxic gases. Estimated emissions from those sites reach into a billion tonnes of CO2.
Methane can be 25 to 84 times more potent than carbon, depending on the time span we use to compare their effect in terms of atmospheric warming. Considering that carbon can trade at between $7-$10 per tonne for this type of carbon offset to many multiples of that, it becomes clear what kind of financial value can be attached to the methane abated from environmental remediation projects.
Over a 20-year period a tonne of methane has 84 times the effect of CO2 in terms of its warming potential. That degrades to 25 times over a hundred years, which explains why methane is one of the lowest hanging fruits in terms of greenhouse gases that need to be taken out of the atmosphere.
Unlike CO2, methane also creates other environmental hazards such as water contamination, direct health impacts and risk to property from its explosion potential or making the property unusable.
Abandoned methane-producing sites are spread across the US and intermingled with population centres with millions of people living nearby, rendering the issue of cleanup important also on the state and federal level. So far state and federal governments have allocated some $4.7 billion to the cleanup of these leakages but this is only a fraction of the process will end up costing.
The two divisions of Zefiro Methane
Zefiro can add real value here with a fully integrated environmental services business. The company’s Services division is fully equipped to do everything that is needed on the ground in a monoline format. It employs rigs, crews, cementing and wireline capabilities to support the methane abatement method. “We are only building the services with this one mission: to address methane-producing industrial sites and cleanup the environment,” said Debs.
The company strictly rejects offers to use its crew to dig wells. Its primary mission is environmental services, it sells its methane abatement offsets to large corporates who are trying to reduce their carbon footprint and would take a dim view on their offset source being involved in fresh drilling.
Given the nature of its business, Zefiro is now also leading on data collection from these sites. The original data points came from the US Environmental Protection Agency but the company is sourcing much more granular data with crews in the field constantly surveying and acquiring bigger and better data sets.
The large amount of data allows the company to drive a highly focused tech innovation plan that is grown both organically and by acquisition. “We are spending all of our R&D dollars on improving methane detection capabilities, finding better downhole capabilities that can ensure that the sites we leave never leak and drive efficiency and speed on and off the site so that we can get not only hundreds but thousands or tens of thousands of these sites shut down in the near term,” said Debs. The company plans to scale its capacity through acquisitions that fit the mission, with two such acquisitions completed in 2023 and more in the pipeline.
The second side of Zefiro’s coin is its Markets division, which works hand in hand with Services. In practice, the Markets division monetises the methane reductions created by Services, it issues and sells methane abatement offsets to buyers in the wholesale market. Increasingly stringent regulation means that those wholesale buyers want to be able to buy year-in year-out and have a transparent source that can deliver the capacity that is needed.
“The potential for our type of methane abatement is absolutely enormous because we will be low-cost generators of hundreds of millions of tonnes of potential credits. We can produce for years to come and that kind of quality of (methane abatement offset) product does not exist in the market,” noted Debs.
Other types of offset are batch related, a project here and there and more on a scale of cottage industry. In comparison, Zefiro offers a high-quality, scaled solution that will drive carbon offset onto a new level. “We will be providing a product that a Fortune 500 company could use for their net zero strategy for years to come,” Debs said.
Three sources of funding
Apart from the sales of the methane abatement offsets the company also benefits from two other sources of funding: corporate and governmental.
Big oil and gas producers are increasingly being forced, pushed, cajoled to do more and more around the effective retirement of wells and Zefiro Methane offers them the best solution on all of their costs.
Methane leakage poses multiple potential dangers to people and property, the state and federal government are allocating an increasing amount of funds, in the billions of dollars, to throw at the problem of redundant sites.
Zefiro Methane’s end-to-end solution
Most other companies in the carbon offset market are not providing end-to-end solutions. Zefiro’s advantage is that it not only originates carbon credits but travels through the whole cycle of the distribution pipeline and sales. This gives it the unique advantage of being able to control the quality of the project. “If this sort of environmental remediation was left to an outside company it would be harder to control the quality of the abatement and quality is a huge issue in this market. One thing is very clear, carbon credit buyers are at the very least not interested in funding new oil and gas production, some are a lot more opinionated than that. We provide an antiseptically clean product that makes institutional grade in the way other buyers can’t,” noted Debs.
The initial tonnes of abated methane are being issued and sold using the methodology put in place by the American Carbon Registry. The ACR is an internationally recognized carbon crediting programme that operates in global compliance and voluntary carbon markets and being listed on the Registry is a stamp of approval of a quality of a carbon abatement project. It is one of only a handful of such registries in the world. The ACR has developed a carbon credit methodology for methane from orphaned wells which “translates” the methane abatement into a different “currency” (CO2), one that can be traded on the markets like the California Cap-And-Trade. In this context it is key that in April 2024 Zefiro successfully completed its first listing on ACR, a project that has been in the works for about a year.
Artificial Intelligence plans
Hand in hand with its work on the data collection, Zefiro Methane plans to develop valuable market intelligence through all the new data streams from the various surveys on the ground and estimates that in the next 12 months it will get enough stable data streams to enable it to start using artificial intelligence in identifying new sources of leakage.
