Lowering LNG emissions [NGW Magazine]
The pressure to lower greenhouse gas (GHG) emissions from LNG is mounting as industry participants try to carve out a continuing role for themselves in the energy transition. This comes as two major buyers of LNG – China and the European Union (EU) – both take their first steps towards long-term decarbonisation targets.
These emissions-reduction goals intensify pressure on LNG producers seeking to sell their output, especially in the long term. Thus, LNG decarbonisation efforts that are already underway are likely to accelerate. This is being done retrospectively – offsetting emissions from individual cargoes – and prospectively, by building low-emission liquefaction terminals.
LNG producers in an ever longer market will have to balance competitive pricing against costly emissions reduction and offset initiatives.
This trend towards lowering emissions from LNG operations is playing out across the world. In North America, Anglo-Dutch Shell’s LNG Canada project, which is under construction on the Canadian west coast, is a prominent example. “Using highly-efficient gas turbine technology from GE and renewable power from the BC Hydro grid for our ancillary power needs, and using lower-CO2 composition of Montney natural gas, the LNG Canada plant is designed to have the lowest CO2 intensity of any LNG facility currently operating in the world,” an LNG Canada spokesperson told NGW. “GHG emissions from LNG Canada’s Kitimat operation will be 35% lower than the world's best performing facilities and 60% lower than the global weighted average.”
There is a possibility that at least one – and perhaps two – new liquefaction projects in North America will go even further. G2 Net-Zero LNG is proposing to build a net zero LNG export and industrial gas production complex in Louisiana by 2026, though an application for the project was only launched this year and thus remains at an early stage.
Separately, NextDecade announced in early October that it was targeting carbon neutrality at its proposed Rio Grande LNG terminal in Texas. This would be achieved through a combination of carbon, capture and storage (CCS) and “proprietary processes”, which the company says would reduce the emissions from the Rio Grande facility by 90%. It is in the process of exploring options on how to address remaining emissions, ahead of a final investment decision (FID) that it is targeting in 2021.
It is by no means certain that these US projects will be built at this point, but in the meantime other facilities around the world have already started turning to CCS in order to offset their emissions. In Qatar, state-owned Qatar Petroleum (QP) is building a CCS facility alongside a major expansion of liquefaction capacity.
Electrification is another option for reducing emissions – and may become a required part of offshore production operations in some jurisdictions, with or without LNG. Norway’s Equinor recently awarded a front-end engineering and design (Feed) contract to Aibel which includes replacing the gas turbines at its Hammerfest LNG terminal with power from shore. Equinor said it may be possible to reduce CO2 emissions from the plant to “near zero” thanks to this process.
And in Russia, Novatek is touting the role LNG can play in a low-carbon future and says it is the only Russian oil and gas company to adopt a long-term methane emissions reduction target. The target – a reduction of 4% in “specific” methane emissions by 2030 – is a comparatively modest one, but comes on top of the company claiming to already have one of the lowest GHG emissions intensities globally.
Carbon-neutral cargoes
In terms of individual carbon-neutral cargoes, Shell is once again a significant player, having sold a handful of such cargoes to Asian buyers since last year and hailed the initial ones as the world’s first.
“The fact that a cargo is carbon-neutral means that all emissions from exploring for and producing the natural gas, through to the use by the final consumer, are offset by credits from a variety of nature-based projects,” Shell told NGW. “The cargo itself can come from anywhere. We just need customers who want it because they are looking to decarbonise their energy use.”
Others are starting to follow in Shell’s footsteps. Japan’s Jera sold its first ever carbon-neutral LNG cargo to India in 2019. More recently, France’s Total reported that it had delivered its first carbon-neutral cargo to China in late September.
The trend of Asian LNG buyers in particular starting to seek out carbon-neutral cargoes can also be seen in a tender launched by Singapore’s Pavilion Energy in April for the supply of up to 2mn metric tons/year of LNG. The tender included an emissions-reduction component, as well as an invitation to collaborate on the methodology for quantifying and reporting the emissions. The results of the tender are being awaited.
Next steps
“So far, it's been Asia that has really led this,” Jonathan Stern, Distinguished Research Fellow at the Oxford Institute of Energy Studies’ (OIES) natural gas research programme, told NGW. “All the cargoes you know about have been delivered to Asia, and the Pavilion initiative, calling for tender, has gotten a lot of attention,” he continued. “But we haven't heard that there's been any specific carbon neutral LNG efforts in Europe, although who knows, maybe the methane strategy may change that.”
A GlobalData upstream oil and gas analyst, Joseph Wisdom, expects this. “Europe could be the forerunner for carbon-neutral LNG in the long term, following their recent methane strategy and in line with their 2050 carbon-neutral goal,” he told NGW.
They are both referring to a new methane strategy that was unveiled by the European Commission (EC) in mid-October, as part of the EU’s broader emissions-reduction targets. Significantly for LNG producers, the EC said it would “engage in a dialogue with its international partners and explore possible standards, targets or incentives for energy imports to the EU.”
Stern said the methane strategy has been set out in very general terms so far, but that it contained the threat that those who do not sign up to accurate measurement, reporting and verification (MRV) of methane emissions could find themselves being assigned default emission values.
“That is stated in very general terms, and also it’s going to take time to happen because we're still at an early stage,” Stern said. “But there's a very clear implied threat to natural gas supplies, but also any supplies of fossil fuels.”
Faced with these growing pressures, LNG producers have to decide how much they are willing to invest into MRV and emissions reduction initiatives in an increasingly challenging market.
“Offsetting carbon emissions is feasible for any LNG facility and can result in carbon-neutral LNG cargoes. However, this is likely not a sustainable long-term method and doesn’t directly deal with the project’s emissions but are a good transition for general LNG decarbonisation,” Wisdom said. “Instead infrastructure development would be preferable, for example CCS components, adding to a project’s capital expenditure and likely passed on to the buyer as a premium. A combination could be optimal for net-zero, as G2 are planning to achieve in North America – capturing 85% of upstream and transport emissions while purchasing the offsets for the remaining 15%.”
There is a further reason for producers to be optimistic, according to Wisdom. “Whether [carbon-neutral LNG] is as competitive or not may become less impactful as more buyers look to secure low-carbon LNG contracts,” he said. Low-carbon LNG with a price premium is not currently a top priority for buyers. “If governments use carbon taxing, however, then such carbon reduction methods could become more commercially viable,” Wisdom said.