Chevron Hitches Low-Carbon Wagon to Renewable Gas

Copyright © 2021 Energy Intelligence Group

Chevron’s joint venture (JV) last year with biomethane producer Brightmark has proved to be no flash in the pan. Renewable natural gas (RNG) is instead a key pillar underpinning the US major’s now-accelerated low-carbon transition strategy — and its Brightmark partnership sits at the heart of its RNG growth plans.

“This is one of the most cost- and carbon-efficient fuels” that can be pursued in the US, Mark Nelson, Chevron’s downstream head, told investors this week. “It was lower risk, both from a capital and execution standpoint, and … it leverages our strengths, partnerships, value-chain thinking and understanding policy.”

RNG can come in many flavors. But Chevron is looking to become a leading supplier of RNG in the US first and foremost with methane captured from manure. Landfill- and wastewater-fed RNG will come later.

Methane from cows and swine typically enters the atmosphere unabated, contributing to rising levels of greenhouse gases in the atmosphere. But capturing the noxious gas and supplying it to vehicle fleets that have been converted to run on compressed natural gas (CNG) rather than diesel makes it a carbon negative alternative from a life-cycle perspective.

In fact, Chevron expects the RNG from its Brightmark venture to have a minus 250 carbon intensity score, on average, based on the California Air Resources Board’s criteria. That makes it one of the most attractive fuels that could be sold under the state’s low-carbon fuel standard, according to the Board’s website.

Indeed, California’s fuel standard plays a key role in supporting Chevron’s early efforts to build out RNG for transport.

The carbon-negative profile of manure-fed RNG helps rack up credits that the US major can both use to cover the emissions associated with its conventional fuels sold in its home state as well as be sold to third parties for a profit. The price of those credits will also rise over time.

They’re also not the only fiscal incentive in play. RNG used in transport also qualifies for credits under the federal Renewable Fuel Standard — and prices for the specific credits Chevron’s RNG would qualify for recently hit record highs.

Nelson explained that RNG costs more to produce in California, but the dual credits keep the economics attractive. At the same time, RNG produced elsewhere in the US can have lower unit costs, make it economically viable even if only the federal credit is applicable.

Chevron says the business already earns “double-digit returns.” It expects this to remain the case over time as greater scale reduces costs, market uptake expands demand and state and federal policies expand to encourage uptake of lower-carbon fuels.

Humble Beginnings

Chevron’s Brightmark JV produces just 2.1 million cubic feet per day currently. Even when those volumes grow exponentially to over 40 MMcf/d by 2030, the volumes would be a drop in the bucket in the major’s natural gas portfolio, which produced 1.68 Bcf/d in the US last quarter and nearly 7.7 Bcf/d globally.

But the modest volumes reflect the time needed to build out fueling infrastructure and foster market development rather than a lack of ambition.

Chevron’s wider low-carbon investment strategy centers around decarbonizing hard-to-electrify sectors, including heavy-duty vehicles, rail, marine and aviation transport. Although many are working to crack the code on battery storage and charging to electrify these sectors, there is no guarantee they will be commercially viable. And even if they are, alternatives like RNG-fed CNG may still prove economically competitive while preserving the carbon-neutral goals of electrification.

That’s a bet Chevron is willing to take. The major bought into four of Brightmark’s existing biomethane plants late last year, and the pair quickly expanded the partnership to encompass 10 additional plants. Four of those will come on line next year, with another six slated for 2023 (see table). The companies are also already discussing the next slate of projects. —

Brightmark: Chevron's Cornerstone RNG Partnership
Tranche 1 — Existing Projects
Athena (South Dakota)
Castor (Michigan)
Helios (New York)
Sobek (Florida)
Tranche 2 — Projects for 2022 Start-Up
Caballero (Arizona)
Meadow Rock (Michigan)
Red Arrow (Michigan)
SunRyz (Michigan)
Tranche 3 — Projects for 2023 Start-Up
Full Circle (South Dakota)
Mill Valley (South Dakota)
Crossroads (Michigan)
C Dairy (Wisconsin)
TBD (Ohio)
TBD (Iowa)
Tranche 4 — Under Development

In the meantime, Chevron is looking to beef up its CNG marketing presence across the US to place those additional RNG volumes. The firm partnered with global trader Mercuria earlier this month to acquire American Natural Gas, giving it 60 CNG locations across the US, with plans for expansion.

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