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Tariq Siddiqui's picture
COO Upstream EP Advisors LLC

Oil & Energy | Business Development | Capital Projects | Offshore Wind -  Proven leader in offshore development and operations, with 25+ years’ expertise in managing business through cycles...

  • Member since 2021
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  • Jul 7, 2021
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ENERGY TRANSITION PATHWAYS: Carbon-neutral LNG is one proposed way; there remains a fair amount of misunderstanding about just what is meant by carbon neutral – or green – LNG.

KEY INSIGHTS

  1. WHAT IS A CARBON-NEUTRAL LNG ?

‘Carbon Neutral’ does not mean the LNG cargo creates zero emissions. Instead, the carbon emissions associated with the upstream production, liquefaction, transportation and, if required, combustion of the gas is measured, certified and offset through the purchase and use of carbon credits, which support reforestation, afforestation or other renewable projects.

2.  IS IT LIKELY TO PICK-UP?

  • So far, few carbon-neutral cargoes (seven in 2020) have been delivered, all to buyers in Asia.
  • Demand for cleaner LNG will grow; the carbon footprint of LNG cargoes will be key differentiator.

3.  WHAT IS THE SIZE OF OPPORTUNITY?

  • For avg. cargo life cycle, ~ 270,000 tonnes of CO2 is produced, requiring like 240,000 trees to offset the emissions.
  • Is this achievable across the entire LNG industry? In 2019 ~ 5,500 LNG cargoes sold (~1.5 billion trees or carbon credit equivalent)? 
  • For upstream, the biggest opportunity lies in reducing CO2 venting, creating an opportunity for CCS and cut emissions by 25%.

4.  WHAT MOTIVATES ASIAN BUYERS ?

  • Demand for LNG in Asia continues to boom and the region is set to be the engine room for global LNG demand growth.
  • Carbon-neutral LNG is sold at a premium, all cargoes  bought in Asia, where carbon policies and investor pressure are weak. 
  • The concerns with air quality rises in many Asian countries, attention is turning to emissions and cleaner burning fuels.

5.  WHAT IS THE FUTURE OF GREEN-LNG ?

  • This is just the beginning of the journey, as LNG demand continues to grow, so will demand for greener LNG.

BOTTOMLINE

Targeting full life-cycle emissions across the entire LNG industry is a big ask, but progress towards emissions reduction in the upstream, liquefaction and transportation of LNG is coming into focus and at the very least, proof or visibility of supplier carbon credentials will become the norm. This will lead to greater 'buyer scrutiny' and 'differentiation' between projects, with impacts for pricing.

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