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GLNG COMMENTARY GLNG

As of early August this would result in a cost Gastech that two sets of buyers could emerge on
of €67,500-70,000 ($78,794-81,697) per LNG the LNG market if carbon-neutral LNG becomes
cargo. However, the law firm warned that the more commonplace. The first set would be those
cost of offsetting one LNG cargo could cost up to that are more carbon-conscious and the second
$2.5mn, or $0.60 per mmBtu ($16.60 per 1,000 would be those that are more sensitive to price.
cubic metres) if the offsets are made through
reforestation. It based this estimate on data from What next?
the International Group of Liquefied Natural The discussion about carbon-neutral LNG
Gas Importers (GIIGNL). comes as the market is set for more liquefaction
A Baker Botts senior counsel, Steven Miles, capacity additions. Qatar – one of the leading
told Gastech that prices can vary so much producers of the super-chilled fuel – is seeking to
because of the different markets for compulsory undercut competitors by developing significant
and voluntary carbon offsets. new low-cost LNG capacity. This week, a warn-
“This variability shows that we’re still in a ing came that this push to bring down the cost of
world in which people are trying to price things,” LNG could make it more difficult for producers It would not be
Miles said. in Australia and elsewhere to sanction new liq-
LNG spot prices have been creeping up, but uefaction projects. surprising if
are still comparatively depressed as the global Under such circumstances, with all LNG deep-pocketed
market remains oversupplied and the corona- projects increasingly struggling to compete, it
virus (COVID-19) continues to threaten any will be all the more challenging to expand the majors such as
recovery in the coming weeks and months. As of carbon-neutral LNG trade. It would not be sur-
September 24, Asian spot prices for November prising if deep-pocketed majors such as Royal Shell continue to
delivery were around $4.80 per mmBtu ($132.77 Dutch Shell continue to lead the way. And if they
per 1,000 cubic metres), their highest level since have set net zero emissions targets for themselves lead the way.
January, while the December price for the Japan in the long term, this will make carbon-neutral
Korea Marker (JKM) is above $5.00 per mmBtu LNG all the more appealing. Again, this makes
($138.30 per 1,000 cubic metres). At such prices, Shell a likely candidate, along with Total, which
a green premium would account for a significant is also particularly active in the LNG industry.
proportion of an LNG cargo, which poses a chal- And it appears based on the initial handful
lenge in a market awash with cheap LNG. None- of carbon-neutral cargoes that buyers in Asia
theless, there are hopes that buyers and sellers – the region that is expected to dominate LNG
that are keen to emphasise their green creden- purchases – have at least some interest. It seems
tials would take the lead in helping carbon-neu- likely that pressure to decarbonise will only grow,
tral LNG to proliferate. so the rise of carbon-neutral LNG may be all but
Indeed, Wood Mackenzie’s principal analyst inevitable. However, the pressure is on to reduce
for Asia-Pacific gas and LNG, Lucy Cullen, told the costs of offsetting its emissions.™

P10 www. NEWSBASE .com Week 38 25•September•2020