Tokyo — Japan's Tokyo Gas has secured 70 million cu m worth of carbon neutral city gas supply customers, with its latest supply starting in April, and it sees great potential in growing the carbon neutral LNG demand as highly practical means toward decarbonization.
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"Carbon neutral LNG is already a capable solution to date [towards decarbonization], and we expect to see an increase in requirements from endusers, which are seeking highly effective measures by 2030," a company spokesman told S&P Global Platts April 13.
Tokyo Gas started April 1 supplying 800,000 cu m/year of carbon neutral city gas to the Yakult Central Institute, marking the first introduction of carbon neutral city gas supply in the Japanese beverage industry.
Under the five-year supply deal to the end of March 2026, the Yakult Central Institute will switch all of its city gas supply to carbon neutral, which would help it reduce around 11,500 mt of CO2.
The latest start of carbon neutral city gas supply is part of Tokyo Gas' 70 million cu m, or about 57,000 mt of regasified LNG, of carbon neutral city gas supply.
The move by Tokyo Gas comes at a time when the Japanese industrial sectors have been addressed by the Ministry of Economy, Trade and Industry for need to decarbonize their heating demand as the country heads toward the 2050 carbon neutrality.
Carbon neutral LNG has been identified by METI as among possible measures for decarbonizing Japan's consumer and industrial sectors as the heating demand accounts for roughly 60% of the energy consumption in the sectors.
"We intend to provide carbon neutral city gas as one of solutions to decarbonize the heating area," the spokesman said.
As means of decarbonizing city gas feedstocks, METI said in its policy proposal March 23 to start injecting more than 1% of synthetic methane produced from using hydrogen into city gas by 2030 and expand it to 90% by 2050 in a bid to implement methanation.
The METI policy proposal called on Japan to consider methanation as one of promising means of decarbonizing city gas, which are mostly regasified LNG, by 2050 as part of the country's aim for carbon neutrality.
Tokyo Gas received in July 2019 its maiden carbon neutral LNG cargo of about 70,000 mt from Shell Eastern Trading, following the signing of a master agreement, under which Shell's carbon credits will be used to compensate the full CO2 emissions generated from exploring and producing the natural gas to be used by the final consumer.
The carbon credits are purchased by Shell from a global portfolio of nature-based projects, and each carbon credit is subject to a third-party verification process.
Tokyo Gas has also been cultivating its carbon neutral city gas end-users, which are now lined up with including New Otani, Marunouchi Heat Supply and Tokyo Gas Toyosu hydrogen station.
Most recently Tokyo Gas and 14 other Japanese companies across different sectors formed on March 9 the Carbon Neutral LNG Buyers Alliance to promote the use of the fuel.
An increasing number of carbon-neutral LNG cargoes have been sold on the market so far with the majority of buyers located in Asia, such as Japan, South Korea and Taiwan. Carbon neutral condensate and carbon neutral crude oil have also been traded as consumers look to offset their emissions from fossil fuels.
Sellers of carbon neutral LNG have included oil majors like Shell and buyers included Tokyo Gas, Toho Gas, GS Energy, Taiwan's CPC, and China's CNOOC. For these trades either the full life cycle carbon emissions or partial emissions of the cargo have been offset using mechanisms like carbon credits.
These trades are only expected to grow as both voluntary and regulated carbon commitments intensify, especially in Asian markets that are heavy end-users of fossil fuels, and with countries like China and Japan set to introduce carbon trading as part of their climate change mitigation plans.