Page 5 - GLNG Week 16 2021

GLNG COMMENTARY GLNG

capacity,” Simonelli said. “So that suggests that setting targets to reduce methane leakage. But
we’re going to have another 100-150mn tonnes it’ll take years of tighter control – regulation or
[of] FIDs over the course of the next three to industry-led – before US upstream gas com-
four years. And that’s an incremental 50-100mn petes on carbon intensity with global basins.”
tonnes than we indicated before.” The failed Engie deal involved NextDecade,
These expectations are likely to be welcomed which is proposing building the Rio Grande
by the developers of proposed projects that have LNG project in Texas. Talks between the two
yet to reach FID. A number of proposals previ- companies collapsed despite NextDecade’s
ously targeting FID in 2020 were pushed back to ambitious plan to reduce emissions from Rio
2021 during the early months of the pandemic, Grande by at least 90%, and potentially 100%,
and now their operators are trying to move through carbon capture and storage (CCS),
them forward. Not all projects will proceed, among other methods. This is attributed to the
though, as illustrated by the recent cancellation French government’s opposition to the use of
of Annova LNG in Texas. hydraulic fracturing, which is banned in France
At the same time, though, the developers of but widely used in the US, including for pro- One factor LNG
other projects on the US Gulf Coast are saying ducing the feedstock gas for the country’s LNG
they continue to aim for FIDs in 2021 and com- terminals. developers
panies elsewhere – such as Australia – are also Farrer’s comments suggest that even if US increasingly need
targeting FIDs this year. Indeed, Wood Mac- LNG developers decarbonise their output,
kenzie anticipates that incremental projects in the feedstock gas could cause concern among to consider is the
Australia with LNG-focused operators might would-be buyers from countries that are pursu-
be some of the early movers among the field of ing ambitious emissions reduction targets. carbon intensity
proposals vying for FID. Both Wood Mackenzie and Baker Hughes
expect the trade of carbon neutral LNG to grow, of their output.
What next? from a low base. Only seven of the 5,500 LNG
One factor LNG developers increasingly need to cargoes shipped last year were carbon neutral,
consider is the carbon intensity of their output. according to Wood Mackenzie.
Indeed, Wood Mackenzie flagged this up as the “A number of our customers have already
“Achilles heel” of US natural gas. started to measure the carbon intensity of
“The US problem is upstream; specifically, their LNG cargoes,” Simonelli said. “We do see
the high carbon-intensity of Lower 48 gas,” a theme and a trend that’s going to continue.
Wood Mackezie’s director of LNG, Giles Farrer, And as we look at also the disclosures that peo-
said last month. “French utility Engie cancelled ple are starting to make, customers on the back
a contract to buy US LNG in Q4 2020 for this end of that on the LNG side, we are hearing
very reason. We’re starting to see US producers that there is a move toward more disclosure,
change behaviour, stopping routine flaring and more transparency.”™

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