South Korean energy company faces complaint over “greenwashing” of gas project in Timor Sea

South Korean energy utility SK E&S faces a "greenwashing" complaint over its $3.6 billion Barossa LNG supply project that is under construction in the Timor Sea off Australia's Northern Territory.

Seoul-based Solutions for Our Climate (SFOC) filed a complaint 22 December with the Korean Fair Trade Commission (FTC). It accused SK E&S of falsely claiming to produce "CO2-free" LNG and "eco-friendly" blue hydrogen from the Barossa project, which will be equipped with carbon capture and storage technology.

"There is no such thing as 'CO2-free LNG'," said Dongjae Oh, a researcher at SFOC who added in a 22 December statement that SK E&S has oversold its CCS technology as "a silver bullet."

Even with functioning CCS, he said "any new gas development project will undeniably add massive amounts of greenhouse gas emissions to the atmosphere."

FTC will decide by February

According to SFOC legal officer Counsel Jihyeon Ha, the FTC will decide whether to proceed with an investigation around February. According to the FTC process, Jihyeon said the competition regulator may impose corrective measures such as stopping SK E&S from running related ads, or refer the case to its prosecution arm.

"If the FTC does not take sufficient legal action against SK E&S, and SK E&S remains status quo, we will discuss internally what further legal steps to take," Jihyeon told Net-Zero Business Daily in an 23 December email.

SK E&S, which did not respond to a Net-Zero Business Daily request for a comment on the legal action, is not the largest stakeholder in the project though.

What's at stake with Barossa

Australian natural gas firm Santos is the operator of the Barossa project with 50% stake, with SK E&S holding 37.5%. Japan's largest power generator JERA has a 12.5% stake in the project, which is not expected to begin producing gas until the first half of 2025.

The Barossa field, which is 300 kilometers north of Darwin, Australia is intended to replace production from the Bayu-Undan field currently supplying dry gas to a liquefaction facility in Darwin.

It will consist of a Floating Production, Storage and Offloading vessel, subsea production wells, supporting subsea infrastructure, along with a gas export pipeline tied into the existing Bayu-Undan to Darwin LNG pipeline.

At the end of March, Santos announced a final investment decision for Barossa that also would kickstart a $600 million investment in Darwin LNG and pipeline tie-in projects, which will extend the facility's life for around 20 years.

Large carbon footprint

The Barossa project has come under fire from SFOC and other groups that argue only the GHG emissions from the downstream LNG liquefaction will be captured while the GHGs released during extraction of the gas will be ignored.

SFOC points to South Korean company's own submission to the Export Import Bank of Korea, which revealed the project would produce anywhere from 3.5 million metric tons (mt) to 3.7 million mt of LNG each year, while yielding 3.9 million mt of GHGs annually during production and transportation.

National Assembly member Jang Hye-young, who made the SK E&S GHG data public after receiving it from the Export-Import Bank of Korea, has questioned the need for the project. She cited International Energy Agency projections of a 55% decline in gas demand through 2050 in its May report, which also said no new oil and gas exploration projects should be undertaken across the world if a "narrow" path to achieving net-zero carbon emissions by 2050 is to be successfully navigated.

South Korea has committed to a carbon neutrality goal and in October President Moon Jae-in confirmed that Asia's fourth-largest economy will aim to cut its GHG emissions by 40% compared with 2018 levels by 2030.

When factoring in the end-use consumption of gas, SFOC said Barossa is expected to produce a total of 13.5 million mt in annual GHGs.

Despite the "CO2-free LNG" slogan, SFOC said SK E&S plans to capture up to 2.1 million mt of GHGs at Barossa, which is only 16% of the estimated annual emissions.

High emissions compared with peers

A separate analysis carried out in March by the Institute of Energy Economics and Financial Analysis (IEEFA) revealed that the carbon content of the Barossa gas was about twice that of the next highest gas resources currently being converted to LNG in Australia.

Adding the venting and combustion emissions at the Darwin LNG plant (2.05 million mt tons of CO2 a year) to the Barossa offshore emissions of 3.38 million mt of CO2 per annum results in a grand total of 5.4 million mt annually to produce 3.7 million mt of LNG each year, the nonprofit research group said.

"This makes the Barossa to Darwin project 'a CO2 emissions factory with an LNG by-product'—a truly questionable investment in a rapidly evolving market," the IEEFA wrote.

Posted 23 December 2021 by Amena Saiyid, Senior Climate and Energy Research Analyst