Deciding what makes LNG GHG neutral

There has been a sharp increase over the past few years in the trade of greenhouse gas (GHG) neutral LNG, yet these volumes still account for only a minuscule share of the overall LNG that is bought and sold globally. There is growing recognition among importers and exporters alike, however, that this market must be rapidly scaled up to ensure that LNG maintains its social licence, allowing it to play a more prominent role in net-zero strategies.

There are clear steps that LNG suppliers can take to reduce the Scope 1 and 2 emissions associated with their product. Across the value chain, natural gas infrastructure can be converted to run on low-carbon energy sources such as renewables and hydrogen. At large-scale facilities, carbon capture and storage (CCS) technology can be employed. Flaring can be eliminated, and methane emissions monitored, quantified and ultimately abated across the value chain.

These steps do nothing to address the much larger Scope 3 emissions that result from the combustion of LNG by consumers, but this is where GHG offset mechanisms provide a solution. After quantifying the associated emissions, parties involved in a trade can obtain certificates generated from projects that reduce or avoid emissions elsewhere, such as investments in renewables and reforestation initiatives.

As the International Energy Agency (IEA) noted last year, though, these offset mechanisms would benefit from greater transparency and a standardised system for monitoring, reporting and verifying the GHG emissions of cargoes. And this is where the International Group of Liquefied Natural Gas Importers (GIIGNL), comprising 86 members involved in LNG importing, has offered a solution.

Standardisation

In November, GIIGNL announced it had established a new framework for the monitoring, reporting and verifying emissions from the LNG chain, and for offsetting these emissions. The group describes the main aims of the framework as the following:

• Provide a common source of best practice principles in the monitoring, reporting, reduction, offsetting and verification, of GHG emissions associated with a delivered cargo of LNG.
• Promote the commitment to, and disclosure of, verified emissions based on consistent GHG accounting criteria and definitions from all relevant stages included in the reporting boundary, thereby facilitating the calculation of a cargo GHG footprint that genuinely reflects its climate impact.
• Promote a consistent approach to declarations related to emission reduction actions and carbon offsets that are associated with an LNG cargo.
• Position emission reduction action as the primary focus of a claim of ‘neutrality’, with the use of offsets to compensate for residual emissions that cannot be reduced.
• Promote full accounting for methane emissions as well as carbon dioxide and other applicable GHGs.

The framework is not meant to replace existing standards and methodologies but rather to build on them, to create one standardised system for creating independently-verified declarations for LNG that cover both emissions and offsets, GIIGNL general secretary Vincent Demoury tells NGW.

“More than 30 GHG neutral cargoes have been traded since 2019, but there is no uniform approach to the quantification of emissions and no uniform approach to the definition of what a GHG neutral cargo,” he says.  “That is the reason we developed this framework.”

In crafting the framework, GIIGNL reached out not only to its members, which account for more than 90% of global LNG flow, but also created a technical task force of over 50 experts. The work does not end there, as GIIGNL has asked companies to share their experiences in implementing the framework, which will undergo periodic reviews.

GIIGNL hopes its framework will spur an uptake in GHG neutral LNG trade, which has thus far been mostly confined to Asia. Companies have much less incentive in Europe as they already have to pay for their emissions in the form of allowances in the EU emissions trading scheme.

Different pathways

The framework sets out several different declarations that companies can make on the climate impact of their LNG (Figure 1).

They can make a Stage Statement, which is a verified statement on the GHG intensity and emissions associated with a specified amount of gas from a defined stage or stages of the LNG value chain, relying on onsite measurements rather than emissions factors. The framework is technology neutral, Demoury says, meaning companies can use whatever effective methods they want to get the primary data. They can also provide a verified LNG Cargo GHG Footprint statement covering emissions from all or part of the chain, for example from production to the delivery point.

A GHG Offset LNG Cargo declaration, meanwhile, is a verified statement of the GHG footprint from all or part of the value chain that then includes carbon credits to offset them. These credits can be generated from projects ranging from renewables, CCS and natural-based initiatives.

“We decided not to exclude any types of projects or favour any types of projects, instead focusing on the key principles for offsetting, such as additionality, permanence and uniqueness.” Demoury says. “This is a field which is still evolving quickly and different geographies may have different requirements in terms of offset strategies.”

A GHG Offset LNG Cargo with Reduction Plan combines this with a plan to curb emissions, which is one of the framework’s ultimate goals.

“If a reporter has a very unambitious target, this would be a judgement of the verifier,” Demoury says. “They would expect meaningful targets, although this is open to interpretation.”

The framework recognises that there are different levels of opportunities for companies to address emissions. For example, more could be done to minimise emissions in the planning of a new facility than could be achieved in reducing emissions from an existing brownfield site.

“We would expect the verifier to raise this as a comment, even if they agree to verify, and therefore this information would be available to GIIGNL when submitted with the cargo statement,” Demoury says.

Finally, companies can produce a GHG Neutral LNG Cargo statement that is fully verified and covers the entire lifecycle, and includes an emission reduction plan and a commitment to long-term decarbonisation, using carbon credits to offset emissions that meet the framework’s criteria.

“This is the gold standard,” Demoury says, giving a company an edge in terms of its climate credentials, and positioning it well as the climate impact of LNG comes under increasing scrutiny over time.