Liquified Natural Gas (LNG) is set to play a pivotal role in the European Green Deal by making a strong contribution to the energy transition. Still, one question remains: how can it be carbon-neutral?
“The EU’s existing gas networks and LNG infrastructure are fundamental to achieving the switch to a decarbonised society,” pointed out Francisco de la Flor, board member of Gas Infrastructure Europe (GIE). “This existing infrastructure will facilitate the expected volumes of decarbonised and renewable gases such as biomethane, synthetic LNG and hydrogen.”
An LNG cargo can offset carbon emissions from either the full life cycle of the natural gas, including upstream gas production, liquefaction, shipping and end-user combustion, or just a part of it. Around six carbon-neutral LNG cargoes have been sold on the market so far and at least one tender has been floated for low-carbon LNG.
More LNG sellers are preparing proposals for carbon-neutral LNG supply as more buyers are committing to additional environmental and sustainability measures. For instance, companies like Shell, Total and bp have all announced plans to significantly cut carbon emissions or to become carbon neutral over the next three decades.
Opportunities to decarbonise natural gas
“Decarbonising natural gas will become a strategic priority for the gas industry,” said Massimo Di Odoardo, Vice President of Wood Mackenzie.
LNG players are realising the value of greenhouse gas (GHG) mitigation and are deploying further efforts to reduce the climate impact of their activities, either for compliance reasons or to respond to shareholder and customer requirements.
When emissions cannot be avoided or reduced, they can be offset through the purchase of credits from carbon removal projects. As a part of the process, stakeholders involved in the trade of an LNG cargo can buy carbon credits for the equivalent amount of GHG emissions associated with the cargo. Each credit represents one tonne of CO2 removed or reduced from the atmosphere.
The most widely traded compliance credits are those which have been generated through emission reduction projects falling under the United Nations’ Clean Development Mechanism (CDM), soon-to-be the Sustainable Development Mechanism (SDM). This mechanism allows emission-reduction projects in developing countries to earn certified emission reduction (CER) credits.
There are even more opportunities to reduce GHG emissions: using biogas for feedstock, reducing emissions from upstream, pipeline and liquefaction facilities, using renewable energy to power the liquefaction facilities and using carbon capture, utilisation and storage (CCUS) technologies.
Methane must be taken into consideration as well
To take into account the full climate impact of LNG activities, the notion of carbon neutrality needs to be extended to include not only CO2 emissions but also methane emissions. The warming potential of methane is 36 times greater than carbon dioxide over a 100-year period. In its latest report, the Intergovernmental Panel on Climate Change says stopping methane leaks is key if we are to keep global warming below 1.5 ℃.
“The immediate task now for the oil and gas industry is to make sure that there is no resurgence in methane emissions, even as the world economy recovers and that 2019 becomes their historical peak,” said Dr Fatih Birol, Executive Director of the International Energy Agency (IEA). “There is no good reason to allow these harmful leaks to continue and there is every reason for responsible operators to ensure that they are addressed.”
A network of carbon-neutral LNG fuelling stations across Europe
In December 2020, Russia’s largest independent natural gas producer NOVATEK announced that its wholly-owned subsidiary, NOVATEK Green Energy launched its first carbon-neutral LNG fuelling station in Rostock, Germany.
“Our vision reflects our strategic objective to increase our LNG platform to up 70 million tons of LNG per annum and contribute meaningfully to promoting the energy transition from coal to natural gas,” says Mark Gyetvay, CFO and Deputy Chairman of the Management Board of NOVATEK. “The launch of our first carbon-neutral LNG fuelling station in Rostock, Germany, is one step in that direction.”
Even the fact that the company’s wholly-owned subsidiary, NOVATEK Polska was renamed NOVATEK Green Energy reflects its strategic vision of promoting natural gas as an alternative, clean-burning fuel to other fossil fuels.
“We are presently building LNG fuelling stations in Russia and Europe as we believe there will be a rapid growth over the next decade in LNG powered light and heavy trucks, for example, as natural gas in the form of LNG is an environmentally friendly fuel emitting about 20 per cent less gas emissions than traditional diesel fuel and gasoline,” Mr Gyetvay tells CEENERGYNEWS.
Currently, NOVATEK has 21 active regasification facilities in Europe, serving more than 400 connected customers and it is confident that the number of end-users will increase. In particular, the company operates seven LNG fuelling stations in Germany and Poland and plans to add additional 10 regasification facilities and 16 more LNG fuelling stations.
“We also successfully launched our 660,000 ton per annum Cryogas-Vystosk LNG complex in 2019 to expand our commercial efforts to deliver LNG as bunkering fuel as well as provide natural gas to areas not connected to the main pipeline grid,” underlines Mr Gyetvay. “We recently reached the one millionth ton milestone of LNG produced from the Cryogas-Vystosk facility since inception and this medium-scale complex will contribute to reducing carbon emissions in the Baltic region and be part of our LNG value chain to supply our European refuelling station network.”
By 2025 NOVATEK plans to deliver up to 200,000 tons of LNG through its own infrastructure network to achieve the EU’s mandate towards clean vehicles and a reduction in carbon emissions.
“In Europe, we anticipate a ten-fold increase in clean vehicles powered by LNG or CNG from approximately 1.3 million vehicles to more than 13 million vehicles by 2030 as noted by some research analyst research,” continues Mr Gyetvay. “Although this number of vehicles is relatively small in comparison to internal combustion engines, it does represent a viable business segment for Novatek Green Energy and creates incremental demand opportunities for the energy industry.”
However, he underlines that it is hard to predict exactly when more than half of Europe’s LNG terminals will become carbon neutral.
“Clearly we are moving towards this direction as there are many EU policy initiatives to support this change to meet increasingly stringent carbon regulations,” he says.
What about the costs?
As explained by Lucy Cullen, Principal Analyst at Wood Mackenzie Asia Pacific Gas and LNG team, over an average cargo life cycle, approximately 270,000 tonnes of CO2 equivalent is produced, requiring about 240,000 trees to offset the emissions. In 2019 around 5,500 LNG cargoes were sold, which means around 1.5 billion trees or carbon credit equivalent, just for that year. And, as LNG demand grows, so do the number of cargoes, carbon offsets and trees required.
There is also a price to anchor in an LNG station, but what does it change when it is a carbon-neutral one?
“This market segment is just developing and the mechanisms and options to offset carbon emissions are emerging,” notes Mr Gyetvay. “Some of the questions I believe that will drive this change are increasing carbon taxes as well as determining who will ultimately pay the cost of this carbon neutrality.”
As a rapidly evolving market, there are various options to mitigate GHG emissions.
“How the market will evolve for voluntary carbon offsets remains a question, but things like CCS (carbon capture and storage), reforestation and co-generation options are available,” he adds. “I believe you will have a combination of buying more carbon credits for some industry players as an option, but clearly some of the larger IOC’s will opt for developing their own clean-burning supply value chain to meet these more stringent environmental mandates.”
After all, he strongly believes that natural gas will positively contribute to the reduction of greenhouse gas emissions and be part of the climate change solutions.
Avoiding and reducing emissions from the LNG value chain should remain the priority, as they are the most rapid, effective and sustainable ways to achieve carbon neutrality.
