Coalition Aims to Help NOCs Integrate Methane Reduction in Debt Financing

A coalition of financial, technical and environmental partners has launched a framework that aims to help investors, lenders, and oil and gas companies integrate methane and flaring performance into debt financing.

The Methane Finance Working Group, an initiative launched at COP28 in 2023, released guidance to “deliver and deploy market-tested finance mechanisms that facilitate decarbonization across the oil and gas sector, while expanding the opportunities to achieve measurable methane emission reductions,” the Environmental Defense Fund (EDF) said in a statement.

The guidance provided by the group “includes a third-party verification process from trusted scientific and engineering experts, establishing an independent benchmark to evaluate and assess company methane performance during the financing process,” according to the statement.

The guidance provides recommendations to adapt market-tested financial instruments to structure bonds, use of proceeds instruments, loans and other conventional debt transactions targeting methane and flaring reductions from the oil and gas industry. It is designed to serve both lenders and borrowers, the statement said.

Although the technology for methane reduction exists, capital flows remain limited due to structural barriers. Many companies lack access to finance tailored to methane mitigation, while investors struggle to assess emissions performance consistently, the EDF said.

Similar bonds have been utilized successfully in other sectors, such as global power utilities, which has cumulatively issued $500 billion in labeled bonds, the EDF noted.

Methane performance is a growing factor in global liquefied natural gas (LNG) markets, where buyers are increasingly evaluating upstream emissions when sourcing gas. As international scrutiny over lifecycle emissions intensifies, financial and operational methane transparency has become a competitive differentiator for producers and exporters, according to the statement.

“Reducing methane emissions across the oil and gas industry is one of the fastest and most effective ways to slow climate warming in the near term. But the financial system hasn’t been designed to support this at scale. This new guidance aims to fill that gap with proven debt tools that have already delivered financial returns and encouraged emissions reductions in other sectors,” Dominic Watson, senior manager for energy transition at the EDF said. “These practical financial solutions can accelerate methane reduction and help companies meet growing global demand for cleaner gas”.

“As a national energy company committed to protecting [the] environment, SOCAR is proud to support the launch of the Methane Finance Working Group,” SOCAR Vice President Afgan Isayev said. “We believe unlocking targeted finance is essential to accelerating the deployment of proven methane mitigation technologies across the energy sector. This initiative is an important step in mobilizing collective action toward more effective and transparent methane management”.

 “To achieve the oil and gas sector’s own methane reduction objectives, companies — especially national oil companies — need better access to capital. By aligning investment with real-world impact, this guidance can help accelerate the deployment of existing technologies that cut methane and flaring, strengthen the role of natural gas in global energy security, and deliver on both climate and commercial priorities,” Landon Derentz, senior director at the Atlantic Council, said.

The Methane Finance Working Group aims to support the implementation of the Oil and Gas Decarbonization Charter, which commits over 50 oil and gas companies, including 29 national oil companies, to reduce methane and flaring emissions to near-zero, according to the statement.

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