LNG industry aims for transparency with new frameworks to assess carbon neutrality of global shipments
Two approaches for tracking and certifying the carbon content of a global shipment of LNG were released 17 November that indicate the natural gas industry's growing interest in improving transparency about GHG emissions and providing low- and no-carbon solutions to customers.
The International Group of Liquefied Natural Gas Importers (GIIGNL) launched the" Monitoring, Reporting, and Verification and GHG Neutral Framework" on the same day that a consortium of three energy companies—Pavilion Energy Trading & Supply, QatarEnergy, and Chevron U.S.A.—announced their own program for tracking GHG emissions that they said is available for adoption across the industry.
"The carbon-neutral LNG market remains quite small but is expected to become a growing part of the business," IHS Markit Research and Analysis Director Gautum Sudhakar wrote in an email to Net-Zero Business Daily on 17 November.
IHS Market has identified at least 27 carbon-neutral cargoes that have been announced, and Sudhakar said "a few more have been alluded to without further details." According to IHS Markit, seven long-term contracts requiring the disclosure of emissions for each cargo have also been announced, and Cheniere, the largest producer in the US, has committed to providing emissions statements to buyers starting in 2022.
GIIGNL says that 20 countries exported more than 350 million metric tons per annum (Mtpa) of LNG in 2020 to at least 43 countries, and that the growth rate in 2021 will be about 6% or more. "New volumes from the US (from Corpus Christi Train 3, Freeport Train 3, and Cameron Trains 2 and 3) and from the restart of Damietta LNG in Egypt are offsetting outages and maintenance in other countries," a representative of the organization told Net-Zero Business Daily on 17 November by email.
GIIGNL is based in Paris, and it has nearly 90 members from 27 countries, representing almost every major LNG export terminal in the world. Its participants develop technical standards as well as standard contracts.
The newly developed emissions framework "is part of a collective industry movement to account for and reduce GHG emissions associated with LNG," GIIGNL said on 17 November. "Entities at every stage of the LNG life cycle can use it to assess the GHG footprints of their LNG cargoes."
The framework promotes verified and consistent quantification of GHG emissions across the entire value chain, from extraction of natural gas, liquefaction, shipping, regasification to final consumption. "It creates a transparent practice to declare GHG neutral cargoes through an independently verified Cargo Statement which sets out both emissions and offsets," Jean Abiteboul, GIIGNL president, said.
Calculations of emissions cover the life cycle footprint across the entire cargo value chain, based as much as possible on primary data, GIIGNL said. The framework uses established, international standards and methodologies for matters such as absolute emissions and carbon intensity, such as American Petroleum Institute and International Standards Organization protocols.
On top of those already-approved measurement procedures, participants in the framework will adhere to new reporting criteria developed by GIIGNL members to ensure that each individual cargo of LNG is correctly tracked.
"We encourage the industry to begin using the Framework from now on, but we understand that alignment will take time as industry participants build necessary resources and capabilities. We look forward to working with all stakeholders so that the global community has the best chance of reaching net-zero climate goals," Abiteboul said.
One issue that GIIGNL tried to address in its framework is use of natural gas after delivery. Natural gas use accounts for 65-75% of the life cycle emissions of an LNG shipment, and GIIGNL said it's out of the control of the LNG producer and shipper.
The Paris-based consortium admitted that it cannot ensure that a predicted level of emissions from end use will be adhered to, but it said that "the emissions associated with the combustion of the LNG itself can be calculated based on analysis of the cargo" and the anticipated use of that gas. It added that end-use accounting must include emissions associated with methane loss or imported energy associated with stages from regasification to end use.
"Based on standard factors, the GHG footprint of LNG cargoes is often reported to be between 200,000 and 300,000 tons of CO2-equivalent on average for the full life cycle," GIIGNL's representative said. "However, this number can vary greatly depending on the origin of the gas, the technologies used along the chain, and the quantification methodologies.
While end-use is by far the largest contributor to emissions, liquefaction accounts for around 6% of the life cycle emissions, shipping about 4%, and regasification 1%, according to research used by GIIGNL's members to develop the framework.
Working through GIIGNL since January, more than 50 companies were represented in the discussions that led to the creation of the framework. The principles behind the program include verifiable emissions reductions, full accounting for methane and CO2 emissions, and to "position emission reduction activity as the primary focus of a claim of 'neutrality,' with the use of offsets [allowed only for the] residual emissions that cannot be reduced."
Estimates on the growth of LNG vary, but they have increased in the last couple of years as the fuel is seen as important to the energy transition for countries that either want to phase out coal or want to deliver reliable power to all of their citizens for the first time. To cite one recent forecast, Baker Hughes issued an update of its LNG outlook this year in which it raised its estimate of demand to 600-650 Mtpa by 2030, compared to a prior estimate of 550-600 Mtpa.
The cost of LNG has been high for the last several months, as demand for gas depleted supplies in Europe this summer and sent prices soaring across Europe and Asia. Providing assurance of carbon neutrality adds another cost factor in an already steamy market.
"Offsetting the emissions produced by an LNG cargo adds additional cost to its overall production and sale," Sudhakar observed. "However, the cost of a carbon-neutral LNG cargo can vary considerably depending on the offsets used, the amount of emissions offset, and because emissions for each LNG cargo range widely. Added cost could be borne by suppliers to secure market share, by buyers aiming to provide low-carbon supply to end-users, or both."
To date, utilities and industrial customers in northeast Asia have been the primary demand center for carbon-neutral LNG, with buyers from Japan, South Korea, Taiwan, and mainland China all purchasing cargoes. India and Singapore have also received a cargo, Sudhakar said.
Europe's first carbon-neutral LNG import was announced in March 2021. Deliveries to Mexico and the Dominican Republic in July 2021 marked the first imports in Latin America.
On 17 November, three companies with experience producing LNG in the Middle East and delivering to Asia launched their own LNG certification program.
Pavilion Energy Trading & Supply (based in Singapore), QatarEnergy, and Chevron U.S.A. published a quantification and reporting procedure through which they will generate a Statement of GHG Emissions (SGE) methodology for delivered LNG cargoes. The SGE methodology will be applied to sales and purchase agreements (SPAs) executed by Pavilion Energy with QatarEnergy and Chevron, but it's intended for wide adoption, they said.
Qatar had signed an SPA in December 2020 with Pavilion Energy Trading to provide 1.8 Mtpa for 10 years beginning in 2023, with every cargo being accompanied by a certificate that will identify the level of emissions associated with it. Those shipments will be verified through the SGE methodology.
"This joint effort to develop a greenhouse gas quantification and reporting methodology is part of a series of projects and initiatives that reflect QatarEnergy's commitment to reduce GHG emissions and to decarbonize the LNG value chain," Ahmad Saeed Al-Amoodi, QatarEnergy's executive vice president of surface development and sustainability, said in a press statement.
Qatar is the world's LNG producer, with output of about 80 Mtpa in 2020. Australia's rapid growth in LNG production capacity has moved it more or less even with Qatar, but Qatar announced a major expansion plan in February 2021: a new four-train, 8-million metric tons/annum expansion at Ras Laffan.
As part of the expansion, for the first time Qatar will make a major step towards reducing emissions as well. The added capacity at Ras Laffan will incorporate carbon capture and storage to reduce emissions by 25% compared to comparable operations around the world. At the same facility, Qatar will reduce emissions from existing LNG operations as well as the expanded capacity through the use of solar photovoltaics to power operations rather than natural gas, and installation of a jetty boil-off system.
Upon completion of the Ras Laffan expansion and others already under construction, Qatar says it will have 110 Mtpa of capacity by 2025.
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