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the Shanghai Petroleum and Gas Exchange 2050. Taiwan is aiming to reduce its emissions by
(SHPGX), which Shell said would offer many 50% by 2050 compared with 2005. And Japan is
downstream gas buyers the opportunity to aiming for a 26% reduction in emissions by 2030
decarbonise their energy use. – though it has been criticised for not setting a
No date has been disclosed for the auction, higher target.
and the size of the cargoes has not been spec- However, the question of additional costs
ified either. However, Shell said the cargoes involved in carbon neutrality needs to be fac-
would provide enough energy to power nearly tored in, especially when the LNG market is
300,000 homes for an entire year. Separately, awash with cheap cargoes, making it more dif-
the super-major has said that an average LNG ficult to be competitive.
cargo of around 70,000 tonnes results in roughly Such extra costs need not be extremely high,
240,000 tonnes of CO2 emissions across the however. While Shell has not disclosed the addi-
value chain. tional costs involved in producing and trading
its carbon-neutral LNG, a paper published by
Cost question the Oxford Institute of Energy Studies (OIES) in
It has not yet been disclosed what additional October 2019 suggested that forest projects are
costs may be involved in producing and selling comparatively low-cost. OIES said that along-
carbon-neutral LNG. However, it comes as the side biogas and biomethane offset projects, for-
industry is ramping up efforts to illustrate the est schemes may not have a great impact on the
role natural gas can play in the energy transi- commercial viability of LNG supplies. It added,
tion. Shell notes that natural gas is already the however, that there are also more costly options,
cleanest-burning among fossil fuels, emitting such as transforming methane into hydro-
45-55% fewer greenhouse gas (GHG) emissions gen with carbon capture and storage (CCS) in
and less than one-tenth of the air pollutants com- either the exporting or importing country. This
pared with coal when used to generate electricity. approach, the institute warned, would substan-
Pursuing carbon neutrality takes this one step tially affect “project economics and the afforda-
further. bility of LNG relative to other choices”.
“Carbon-neutral LNG cargoes are another Further complicating this picture is the vari-
choice we are offering our customers, as they ety of attitudes towards decarbonisation among
seek to address their CO2 emissions today,” countries. For some, decarbonisation is simply
Shell’s vice-president of LNG marketing and not a priority and the affordability of LNG has
trading, Slavko Preočanin, said in 2019, when already posed a challenge in times when the
the company’s first carbon-neutral cargoes were price of the fuel was higher. Indeed, this has been
announced. “In turn, they are then able to offer known to result in some countries turning back
the same to their customers, who increasingly to coal-fired power generation.
want to reduce the net carbon footprint of their LNG spot prices are currently low, allowing
energy use,” he added. more countries to buy the fuel. But OIES warned
As more and more countries adopt ambitious that a shift to low and zero-carbon gas had the
decarbonisation goals, it will not be surprising if potentially to raise costs substantially, depending
they turn to carbon-neutral LNG – among other on the policy environment, among other factors.
options for offsetting their emissions. While car- It is likely that some voluntary efforts by com-
bon-neutral LNG is still at a nascent stage, some panies involved in the LNG industry to decar-
of Shell’s customers to date are from countries bonise will increasingly be coupled with policy
that are increasingly prioritising decarbonisa- initiatives, at least in some countries. The chal-
tion. For example, South Korea’s government lenge will be to strike the right balance between
recently adopted a net-zero emissions target for decarbonisation goals and affordability.™

P8 www. NEWSBASE .com Week 26 02•July•2020