Christmas; a time of festive good cheer and occasional natural gassy excesses. Fortunately, this brussel sprout-fuelled bonanza tends to pass by mid-way through whichever repeat you happen to be watching on Christmas day.

Contrast that with the US – which is increasingly gassy all year round!

I know what you’re thinking- what am I talking about? Am I just being rude? No, I’m referring, of course, to the US’s natural gas production. Which is at record levels, as is gas power electricity generation. In fact, the US became a net exporter for the first time in 2017 (liquid natural gas (LNG) exports rose 58% in the first half of 2018, compared with the same period in 2017).

Which is good, because globally gas (as a cleaner burning fuel) is benefitting from coal’s demise. Hence its ‘transition fuel’ status.

Source: BP Statistical Review of World Energy.

The problem is, that assumption only holds true if you don’t let methane (the main component of natural gas) leak out everywhere during its production or transport! If this happens, the arguments around ‘transition fuel’ begin to break down since methane is a far more potent greenhouse gas than CO2, (think 80x more potent). If that happens US gas’ export potential also becomes potentially diminished.

That’s why both Kames and Aegon Asset Management recently supported a collaborative letter from investors to 29 oil and gas companies urging their support (publicly and privately) for sensible methane regulations by the US Environmental Protection Agency’s (EPA). Specifically, our concerns relate to the EPA’s proposed roll-back of standards regulating oil and gas methane emissions and the risk that further proposals will eliminate direct regulation of methane emissions from US oil & gas drilling sites completely.

Minimising methane leakage is important, not least because recent scientific studies* (based on analysis of 30% of sites in the US) suggest that methane leakage from the oil and gas industry are 60% greater than official estimates. We expect the highest ESG standards and we also want a level playing field for the companies that we invest in**; for the oil & gas majors (who argue that they hold themselves to the highest international standards) and the rest. Involuntary natural gas leakage of any sort is never a good thing……


**Kames Global Sustainable Equity Fund doesn’t invest in the oil and gas majors (or minors).

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