According to the latest 2020 edition of the GECF Global Gas Outlook 2050, the demand for natural gas is expected to rise by 50%, from 139 Tcf (3.95 Tcm) in 2019 to 209 Tcf (5.92 Tcm) in 2050, as gas remains the cleanest burning hydrocarbon.
Despite that, meeting global targets for climate change mitigation is one of the biggest challenges. Significant emissions are released through the combustion of gas to drive the liquefaction process, while any carbon dioxide (CO2) detached before entering the plant is frequently emitted into the atmosphere.
Subsequently, investors, regulators and customers exert mounting pressure on the gas industry, because it needs to do more to accomplish climate objectives and focus on reducing emissions.
More than 120 countries have already developed a climate risk strategy that sets targets to reduce greenhouse gas (GHG) emissions to net zero by 2050.1 As natural gas has a central role to play in mitigating carbon emissions, liquefied natural gas (LNG) producers have started to look for ways to minimize or counterbalance their carbon footprints, which ongoing LNG decarbonization efforts are likely to expedite.
Accordingly, top LNG producers, traders and consumers have indicated their plans to decarbonize the LNG supply chain. This is being done in two ways: offsetting emissions from individual cargoes retrospectively and building low-emission liquefaction terminals. As a result, the “Green LNG” term has appeared as a new product within the LNG industry.
The carbon-neutral or Green LNG market is an emerging prospect whereby “green” indicates either the reduction of GHG or the offset of GHG emissions, linked to some, or all, elements of the LNG value chain – from production of upstream gas and pipeline transportation, to liquefaction, transportation, regasification and downstream utilization of natural gas.
Companies in the LNG value chain can diminish GHG emissions in numerous ways. Using biogas as feedstock, decreasing emissions from upstream, pipeline and liquefaction facilities; applying renewable energy to power their liquefaction plants; or using carbon capture and storage (CCS) or carbon capture, utilization and storage (CCUS) technologies by reinjection of CO2 into the subsurface after it had been detained during the processing of the feed gas before liquefaction.
Therefore, carbon neutral does not mean that the LNG cargo generates zero emissions, rather that LNG sellers can counterbalance their GHG emissions by obtaining offsets to compensate for all or part of their GHG emissions or the utilization of carbon credits, which reinforce reforestation, afforestation or other green projects.
Last year, the leaders of the G20 endorsed the concept of the circular carbon economy (CCE), and the GECF is part of this process. CCE intends to include a wide range of technologies such as CCS/CCUS to promote economic growth and to manage emissions in all sectors.2,3
In contrast, Qatar Petroleum (QP) is a company that applies a combination of strategies to reduce its emissions. Its future LNG production will be low-carbon-based, because the company is building a CCS facility alongside its 126-mtpa liquefaction capacity expansion by 2027.
As part of its new sustainability strategy, QP has announced that its goal is to reduce the emissions intensity of its LNG facilities by 25% by 2030. The capture and storage of CO2 from its LNG facilities of about 7 mtpa by 2027 is another goal.
Furthermore, QP intends to drop emissions at its upstream facilities by at least 15%, as well as cut flaring intensity by more than 75% by the end of this decade.
Additionally, by 2030, QP is attempting to abolish routine flaring. By 2025, the company would like to minimize fugitive methane emissions along the gas value chain by establishing a methane intensity target of 0.2% over all its facilities 1.
In certain supply contracts of the company, environmental considerations are incorporated as well.
In November 2020, QP signed the first long-term deal with “specific environmental criteria and requirements,” which was designed to minimize the carbon footprint of the LNG supplies with Singapore’s Pavilion Energy, and to provide 1.8 mtpa of LNG over a 10-year period.
To fulfil the objectives of decreasing GHG emissions, CCS also helped the case in Australia. Chevron is the operator of the 15.6-mtpa Gorgon LNG offshore Western Australia and has injected more than 4 million tons of CO2 in the CCS facility since its commissioning in August 2019.
Meanwhile, NOVATEK has embraced a long-term methane emissions reduction target by 2030 in Russia, mainly to diminish methane emissions per unit of production by 4% in the production, processing and LNG segments. Moreover, the company intends to decrease GHG emissions per ton of LNG produced by 5%.5
In this regard, NOVATEK and Baker Hughes, which provide engineering and turbomachinery at Yamal LNG, signed an agreement to introduce hydrogen blends rather than solely running methane from feed gas into the main process for natural gas liquefaction to reduce CO2 emissions from NOVATEK’s LNG facilities.6
Bio-LNG will have a significant role in the coming years to form the heavy road and water transport in the Netherlands. The construction of the first Dutch bio-LNG installation was launched in Amsterdam last November.
Renewi (the waste management company), Nordsol (for processes the biogas into bio-LNG) and Shell (to sell this bio-LNG at its LNG filling stations) have developed this project. Biogas is made up of roughly 60% methane and 40% CO2. An additional CO2 cutback takes place due to the recycling of the CO2 by-product in the market, which results in a 100% CO2-neutral fuel.7
Inpex, which is Japan’s biggest oil and gas producer, has recently disclosed its strategy to become a CO2 net-zero company by 2050 by developing its renewable and hydrogen energy together with the utilization of carbon capture technologies. Japan has also stated in October 2020 that the country would become carbon-neutral by 2050.1,8
Two major LNG importer regions, namely, Asia Pacific and Europe, have already set policies regarding long-term decarbonization targets. Most of the carbon-neutral LNG cargoes have been supplied by companies in Asia to a certain extent, where carbon policies and investor pressure are fairly fragile.
According to the 2020 edition of the GECF Global Gas Outlook 2050, it is forecasted that LNG imports to Asia will increase to about 800 Bcm (585 mt) by 2050, and with 71% of global LNG imports, the region is set to be the driving engine for global LNG demand growth.
As concerns with air quality rise in numerous Asian countries, the most realistic solution to attain a decarbonized society in the future by minimizing the level of CO2 on a global scale, is the combination of natural gas and renewable energy. Therefore, emissions and cleaner-burning fuels are going to be the center of attention. (Table 1)
Europe could be the predecessor for carbon-neutral LNG in the long term, by sticking to its new methane strategy, which was revealed by the European Commission (EC), and in accordance with their 2050 carbon-neutral goal. Importantly, EC suggested LNG producers to engage with their international partners to explore possible standards, targets or incentives for energy supplies to the EU.9
Which part of the LNG value chain should take responsibility?
An LNG seller will probably need to diminish and offset GHGs, which emphasizes the need for robust offset markets to be completely carbon neutral through the entire LNG value chain.
Accordingly, this highlights challenges for legacy LNG projects with limited means to decrease carbon, making them dependent on expensive market mechanisms. LNG producers must keep the balance between the competitive fuel pricing and the expensive emissions reduction initiatives. Therefore, the question of who pays the additional costs to produce Green LNG is yet to be decided.
As noted, the balance of carbon emissions is feasible for any LNG facility and can lead to carbon-neutral LNG cargoes. Although this is probably not a sustainable long-term process and does not directly cope with the project’s emissions, it is a good transformation for general LNG decarbonization.
However, the GECF proposes that both sellers and buyers must contribute to achieving emissions targets. The discussions with respect to these issues should involve all LNG industry players, such as sellers, buyers, traders and policymakers.
A more focused perspective that targets minimizing emissions in upstream and liquefaction might be more feasible for LNG producers. This will also associate with the already ongoing efforts from them, because they must control their carbon footprints under more pressure from the public and investors.
In conclusion, as LNG demand keeps expanding, the demand for Green LNG will grow as well. Green LNG can help ensure that natural gas preserves its role as a crucial part of the energy mix, supporting climate goals over the energy transition period.
As stated in the 2019 Malabo Declaration, at the 5th GECF Summit of Heads of State and Government in Equatorial Guinea,10 the GECF Member Countries reiterate the strategic role of the development, deployment and transfer of advanced technologies for more effective production, and the utilization of natural gas to enhance its economic and environmental benefits.