Carbon-neutral liquefied natural gas (LNG) could become a future trend and a vital component of the future energy mix, but it may not be as straightforward as it may sound.
Wood Mackenzie’s principal analyst, Asia-Pacific Gas & LNG, Lucy Cullen told the Gastech Virtual Summit that carbon-neutral doesn’t simply mean a cargo creates zero emissions. It means emissions are measured, certified and offset, Kallanish Energy reports.
“There is no consensus yet on which emissions should be offset. Various definitions have been applied so far, ranging from ambitious objective to offset full life-cycle emissions of LNG cargoes, to offsetting part of the value chain,” she explained.
The long-term sustainability of carbon-neutral LNG and the best way to reduce its carbon footprint is a challenge “which must be addressed,” Cullen said. “Measurement methodologies and standardization will be critical if carbon-neutral LNG is to become more mainstream.”
Shell and Jera were among the first movers in the trade of carbon-neutral LNG, started last year. Apart from good news headlines and early mover advantage, Cullen believes these first deals offered participants important experience as the world moves into a lower carbon future.
The analyst said “targeting emissions reductions in certain segments of the LNG value chain seems an “achievable route to carbon-neutral LNG and wide-scale adoption in the industry.”
However, buyers’ confidence needs to be boosted with further measurement and standardization, as well as policy and even regulation. “Offsetting the entire life cycle of every LNG cargo is an ambitious goal,” Cullen said in her presentation.
“We may very well see that – at the very least – proof or visibility of supplier carbon credentials will become as norm. This will lead to greater buyer scrutiny and differentiation between projects, and prices,” Cullen said.
According to Wood Mackenzie, LNG is one of the most emission intensive resource themes in an upstream company’s portfolio. CO2 venting and fuel use for liquefaction are the key sources of upstream LNG emissions.
LNG has the third largest emissions intensity among energy resources at around 40tCO2e/kboe, only behind oil sands and heavy oil. However, emissions vary across LNG projects.
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