Page 9 - GLNG Week 38

GLNG COMMENTARY GLNG

Carbon-neutral LNG moving

into the spotlight

The prospect of widespread carbon-neutral LNG trading

is increasingly under discussion, but would need to be

balanced with cost-competitiveness

ENERGY THE concept of carbon-neutral LNG is being gas prices are seen as key to displacing compet-
TRANSITION talked about with increasingly frequency. It ing fuels such as coal and penetrating emerging,
accounts for only a miniscule fraction of the price-sensitive markets in Asia.
WHAT: LNG market to date, but will likely grow, though It is anticipated that aiming to produce car-
The concept of the industry will need to take care to balance bon-neutral LNG will add a price premium to
carbon-neutral LNG decarbonisation with cost-competitiveness. the fuel. Such a premium would be distributed
is increasingly in the To date, only six cargoes of LNG that can be between companies in the supply chain, but
spotlight. described as carbon-neutral – which does not nonetheless risks raising the cost of LNG, though
mean that the fuel itself creates zero emissions by how much is yet to be established. Some ini-
WHY: but rather that they have been measured, certi- tial estimates have been put forward, including
Decarbonisation is fied and offset – have been traded. Four of these one by Australia’s Origin Energy. According to
becoming more of a were cargoes sold by Royal Dutch Shell since Origin, for a standard LNG cargo with average
priority across the energy 2019 and involved full-lifecycle carbon offsets. carbon dioxide (CO2) emissions of 304,000 tons
industry. One was a partial offset by Japan’s JERA and (276,000 tonnes), the “green premium” could
there has also been a tender by Pavilion Energy come to around $0.80-1.70 per million British
WHAT NEXT: for offsets up to the point of delivery. thermal units ($22.13-47.02 per 1,000 cubic
The discussion about metres) assuming an average offset or abate-
carbon-neutral Cost concerns ment cost of $10-20 per ton ($11-22 per tonne)
options comes as new Earlier this month, carbon-neutral LNG was of CO2.
liquefaction capacity discussed at the Gastech Virtual Summit, where Law firm Baker Botts has also produced an
threatens to bring down speakers noted that the growing appetite for estimate, based on Certified Emissions Reduc-
LNG prices further. offsetting emissions from the fuel would raise tions verified under the Kyoto Protocol trading
its costs. However, such an increase in the price at €0.27-0.28 per ton ($0.35-0.36 per tonne)
of LNG would come at a time when low natural of CO2 for each month remaining in 2020.

Reforestation is an
option for offsetting
LNG emissions, but
potentially involves
higher costs.

Week 38 25•September•2020 www. NEWSBASE .com P9