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LNG has a very strong future in the energy transition, Cheniere
LNG President and CEO Jack Fusco and JOGMEC Chairman and CEO
Tesuhiro Hosono said during a session at CERAWeek by IHS Markit on
1 March.
The Asia-Pacific region will be the driver of LNG demand, said
Fusco, in the session titled, "What Are the Fuels of the
Future?"
"There's huge demand growth potential in Asia right now," Fusco
told IHS Markit Chief Strategist for Oil and Gas Michael Stoppard.
"If you look at China's five-year electrification plan, they want
to take their share of power from natural gas combined-cycle
[generation] from 8% to 15%. If they are successful, that could be
[the demand equivalent of] three more Chenieres. The demand is
phenomenal for the product."
At the same time that the company is eyeing demand growth,
Cheniere is committing to improving the environmental footprint of
LNG, to keep it relevant in a world in which many nations have
announced net-zero carbon emissions by 2050 or 2060. In February,
Cheniere said it would begin to disclose the carbon emissions
of its LNG on a per-cargo basis in 2022, the first US producer to
make such a promise.
This carbon dioxide-equivalent disclosure will encapsulate the
entire value chain, Fusco said, and it will include methane
emissions as well. "We are uniquely situated to influence [carbon
emissions] because we buy the gas, transport the gas, liquefy the
gas, and in some cases deliver all the way to the customer's
flange," he said. "So, we are in a great position … to be able to
monitor, validate, and report on those emissions, but also to clean
up those emissions and make LNG a sustainable fuel."
Cheniere is already reducing the carbon intensity (CI) of its
LNG production, a measurement of the emissions of carbon per unit
of output. More is coming, Fusco said, noting: "Already, we are
looking at whole variety of things we can do internally to help our
suppliers, as well to clean up our own emissions profile. We need
to make sure we have an auditable process, that we are transparent,
and that technically people understand what the data is telling
them, and they believe it."
The task is complicated, particularly upstream of the
liquefaction plant, Fusco admitted. "We bought gas from 68
producers on 15 pipelines yesterday. Some days, it's a hundred
producers on 26 pipes," he said. "It's not easy to come up with
carbon emissions specific for each cargo."
Gas producers and pipelines have reduced their carbon emissions
and improved their own measurements in the last few years, and
Cheniere can build upon those developments.
For its own operations, as the company gains more experience
running its nine LNG trains at two facilities, it has found ways to
debottleneck its operations and optimize maintenance. As a result,
he said CI "is down dramatically," and production is up. On the
production side, Cheniere's nine trains produce as much volume as
the nameplate capacity of 10 trains, or an extra 5 million metric
tons/annum (Mtpa) of LNG.
The added 5 million Mtpa has enabled Cheniere to reach out to
new customers, Fusco explained, and propel more use of LNG. Most of
Cheniere's output is committed to 20-year contract buyers, but the
incremental capacity is sold on the spot market. Fusco said
Cheniere has found spot buyers in countries that are less wealthy,
and which do not have the creditworthiness to make long-term
contractual commitments to LNG. "We can meet their needs on a
short-term basis," he said.
Japan's experience with LNG
Japan is not one of those countries with a creditworthiness
problem, and its gas buyers have held long-term LNG and oil
contracts for many years. But they are seizing opportunities to
connect with new suppliers, such as Cheniere, to expand their
options, said Hosono.
This is crucial for a country that imports all of its fossil
fuels, said Hosono, who leads the government-sponsored entity known
as Japan Oil, Gas and Metals National Corporation, which
coordinates the nation's energy supply.
"Energy security was the foundation of our policy … how to
secure oil and gas to meet growing demand, and move away from
dependence on the Middle East, which is our largest supplier," he
said. "But times have changed. Energy demand has peaked in Japan.
The US has become a major exporter of oil and gas, causing
structural changes in the supply side. And we have seen the global
interest on climate change."
As these developments have emerged, gas is taking a greater role
in the country's energy mix, he said. Japan has shifted from not
only being a major importer of LNG, but also a player on the LNG
trading market, as contracts with some producers such as Cheniere
allow for resale.
"Gas is part of our energy transition," Hosono said. "Once we
overcome the hefty investment in LNG, then we [have been able to]
expand LNG trade volumes and improve logistics in quality and
quantity to supply other chains in the Asia-Pacific region. This
ensures other countries in the region can gain access."
The country continues to invest in new LNG import terminals and
regasification capacity, and also in pipelines to move gas to
industrial and residential users, he said.
On top of that, Japan has committed to net-zero carbon by 2050,
and this has led JOGMEC and the companies with which it works to
look for ways to reach carbon neutrality. "It's unrealistic that we
can transform [away from fossil fuel use], so that's why we support
wise use of fossil fuels and reduced emissions ... we will be
paying more attention to carbon capture and storage," he said.
JOGMEC supports carbon pricing to incentivize the use of this new
technology.
Looking further down the road, Hosono said that he "has a high
expectation that green hydrogen will be the backbone of green
innovation," adding: "It's necessary to change way our way of
thinking to use hydrogen in fossil fuels as the carrier of
hydrogen."