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Australia’s Woodside, Trafigura trade world’s first carbon offset condensate cargo

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Australia’s Woodside, Trafigura trade world’s first carbon offset condensate cargo

Highlights

Cargo loaded from Australia's Pluto LNG terminal

Australian hydrocarbon exporters compete with Middle East

LPG next to go carbon neutral soon

Sydney — Australia's Woodside Energy and commodity trader Trafigura have traded the world's first carbon offset condensate cargo, which loaded from Australia's Pluto LNG terminal in Western Australia, the companies said in a joint statement March 15.

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The trade comes after several cargoes of carbon neutral LNG and at least one cargo of carbon neutral crude oil have been traded globally, as consumers look to offset the impact of fossil fuels and suppliers rush to establish carbon trading and offsetting mechanisms to meet future demand.

Woodside Burrup and its Pluto LNG joint venture participants Kansai Electric Power Australia and Tokyo Gas Pluto delivered their first cargo of carbon offset condensate to independent commodity trading company Trafigura, the statement said.

This could be the first carbon offset condensate cargo traded globally, demonstrating opportunities for carbon offset condensate, said Mark Abbotsford, Woodside's vice president, marketing trading & shipping.

"The carbon dioxide equivalent emissions associated with extraction, storage, and shipping of the 650,000 barrel cargo will be offset through a combination of efficiency measures, which reduce emissions, and surrender of high-quality carbon offsets," the statement said.

It said Trafigura was working with the shipowner to minimize actual emissions associated with transporting the cargo, and the carbon offsets have been sourced from nature-based projects located in the Asia-Pacific region.

Competing with Qatar, Middle East

Australian LNG already competes with Qatari LNG on various levels including short and long term contracts, and future carbon neutral LNG supply.

The carbon offset condensate cargo from Pluto LNG would signal that Australian hydrocarbon exporters, despite high costs, are looking to compete with their Middle East rivals on a range of other oil products, and are in advanced stages of getting their upstream offsets in place.

Demand is likely to come from a range of downstream users.

Several Asian end-users that regularly rely on Australian condensate feedstocks including Indonesia's Trans Pacific Petrochemical Indotama, South Korea's Hanwha Total and Singapore's Jurong Aromatics Corp. are keen to regularly feed their condensate splitters with carbon-neutral Australian ultra-light crude as the petrochemical makers aim to become net zero-carbon companies within the next couple of decades, according to feedstock trading and plant operation sources at the three companies.

The trading sources noted that Australian condensate often commands a lofty premium over other similar ultra-light grades in the region including Malaysia's Kimanis and Cakerawala condensate, and Qatar's Deordorized field condensate due to extremely low sulfur content, and the additional premium could be added to the Pluto grade, making it a less attractive feedstock option in terms of refining margin economics.

Australia may not be on par with giant OPEC producers in terms of output and export volumes, but it still stands among the top-tier producers in terms of quality of the crude and condensate produced, making it a niche market for Asian buyers to tap into, the feedstock trading sources added.

The outright price spread between Australia's flagship North West Shelf condensate and Qatar's DFC averaged $1.26/b to date in the first quarter, S&P Global Platts data showed. The premium attached to a carbon neutral condensate was not immediately clear, but lower shipping costs from Australia would be an advantage.

More products to follow

Woodside and Trafigura also have a memorandum of understanding to look at opportunities in marketing of carbon offset condensate, crude oil, and LPG.

This means that upstream configurations have been sufficiently tweaked to supply a whole range of carbon neutral products, including carbon neutral LPG, which has not been publicly announced yet but is likely in the works.

The carbon footprint of a cargo can be partly or fully offset, from its production, storage, transport and end-user parts of the carbon lifecycle.

"Carbon dioxide equivalent emissions generated by extraction, storage and shipping of the cargo will be calculated jointly by Woodside and Trafigura. Calculation of emissions associated with extraction and storage will be based on data gathered by Woodside, as operator of Pluto LNG. Calculation of carbon emissions associated with shipping will be based on data collated by Trafigura, specific to the cargo voyage," the statement said.

Woodside holds a 90% interest in Pluto LNG while Japan's Kansai Electric and Tokyo Gas each hold 5%.

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