Carbon-neutral LNG ambition requires industry-wide methodology: Flame

London — Ensuring LNG buyers can be confident that carbon neutrality in LNG supply means the same across the industry, an independent body should be established to develop industry-specific methodologies, speakers at the virtual Flame conference said Oct. 13.

Carbon neutrality is expected to increase in importance to LNG buyers given the drive toward net-zero emissions across parts of the world, and already some carbon-neutral LNG cargoes have been sold on the market where the carbon footprint of the supply is fully offset.

But to date there is no centralized function to ensure that carbon neutrality means the same from producer to producer.

"There is a lack of a clear and agreed methodology across the industry on how to verify emissions,", director of integrated gas markets at Australia's Origin Energy, Samuele Ravelli, said.

Ravelli said there should be an independent institution set up to establish such a methodology.

"It would give confidence to customers that carbon-neutral LNG means the same for LNG from different sources," he said.

Partner at environmental consultancy ERM UK, Melanie Eddis, echoed the call for a consistent methodology on how to measure LNG carbon neutrality.

Eddis said the oil and gas sector had a long history of establishing voluntary methodologies, with "plenty of precedents" around methodology and protocols.

"How to differentiate between one LNG source and another is key," she said.

She said there needed to be industry-specific methods that would enable the carbon intensity factor in LNG cargoes to be measured in the same way across the sector.

"We will see that, but at the moment we don't have it," she said.

Price premium

Ravelli said that Origin estimated that a theoretical LNG cargo sent from Eastern Australia to a gas-fired power plant in Asia emitted around 304,000 mt of carbon dioxide.

Using carbon offsetting, it would cost around A$3 million ($2.2 million) per cargo to make the LNG carbon-neutral, he said.

"That is quite expensive so who is going to pay?" he asked.

Producers, he said, would have to absorb most of the cost, though not all of it. "Customers will also have to play their part," he said.

He added that without a real incentive to make the switch, it would be unlikely that market participants would take the step on a voluntary basis.

"There is potentially a level of interest in paying some premium [for carbon-neutral LNG] but it seems to be an exception rather than a rule," he said.

Vivek Chandra, the CEO of Texas LNG, which is developing a 2 million mt a year LNG export facility in the US, said there was interest in carbon-neutral cargoes.

"We have seen cargoes over the last few months sold at a premium," Chandra told the conference.

He added that his project would be much greener than most global LNG liquefaction projects as it would not use gas to run its compressors.

"If you're looking for green LNG, Texas LNG is one of the choices you should look at," Chandra said.

He said the project would use as much renewables-sourced electricity as possible to drive its compressors.

"We can offer green LNG just by our very design," he said. "We have to look at our systems to be able to offer LNG in the most environmentally friendly manner that doesn't involve extra cost to the buyer," Chandra said.

Texas LNG FID in 2021

Texas LNG is expected to take its final investment decision "toward the end of next year," Chandra said, with first production expected in 2025.

He said the company was in the process of finalizing its buyers. "We're looking at selling a portion of our supply to Europe, a portion to Asia and a portion to Latin America," he said.