Electrification of existing infrastructure
The production and subsequent liquefaction of natural gas is an energy intensive process . The electrification of oil and gas platforms using power from renewable sources ( such as offshore wind farms ) has the potential to abate significant emissions associated with oil and gas production . The UK Oil and Gas Authority concluded that electrification had the potential to reduce 20 % of 2020 operational CO2e emissions , rising to 40 % by 2030 .¹³ Further electrification of natural gas production and liquefaction infrastructure has the potential to significantly reduce GHG emissions in the sector – with the added benefit of preserving natural gas for liquefaction , rather than being used for power-generation in the production / liquefaction process .
The role of carbon capture and storage
One way in which LNG producers are seeking to minimise GHG emissions associated with their upstream operations is by capturing and storing CO2 emissions . CCS involves the capture of CO2 emissions before they are emitted into the atmosphere , with the CO2 then injected into geological formations underground .
The $ 28.75bn North Field Expansion Project in Qatar will include a reported $ 200m of expenditure on emissions reduction technology , minimising emissions from upstream operations through the use of renewable energy sources to power upstream infrastructure . The project will also utilise CCS to minimise CO2 emissions that cannot be avoided in the natural gas production and liquefaction process . In the US , LNG exporters are planning to use CCS to minimise emissions and perhaps as a means of separating their product from competitors , with a number of US LNG exporters proposing to deploy CCS technology to minimise emissions associated with the energy-intensive liquefaction process . CCS technology can also be used to capture emissions associated with the combustion of natural gas , which , as discussed above , is where the majority of CO2 emissions arise . Whilst there are a number of planned natural gas power stations featuring CCS or CCS upgrades to existing power stations , there are not currently any utility-scale gas power projects integrating CCS technology in full commercial operation . However , CCS has not been an unmitigated success , with the difficulties in successfully implementing CCS at the Gorgon LNG project demonstrating that CCS may not be a “ silver bullet ” for minimising CO2 emissions in the LNG value chain .
Carbon Offsetting What is offsetting ?
Perhaps the biggest development in the Green LNG space is the emergence of integrated carbon offsetting in sales of LNG cargos . This involves offsetting the CO2 emissions associated with an LNG cargo through the purchase of verified / voluntary emissions reduction (“ VER ”) certificates , with each certificate equivalent to the offsetting of one metric tonne of CO2e . VER certificates are distinct from compliance derived carbon credits , such as the EU Emissions Trading Scheme , the UK Emissions Trading Scheme and the Regional Greenhouse Gas Initiative .
The LNG-offsetting market is bespoke and the size of the offset can be tailored to cover the preferred “ scope ” of the party ’ s emissions . These are :
• Scope 1 – direct emissions arising from the reporting party ’ s operations ;
• Scope 2 – indirect emissions arising from the reporting party ’ s operations ; and
• Scope 3 – all other indirect emissions in the reporting company ’ s value chain that are not within Scope 2 .
The table below sets out the various scope of carbon dioxide emission in LNG value chain :
Party
LNG Producer
LNG Transporter
Upstream
( Natural gas production , transportation to terminal and liquefaction )
Scope 1 and 2
Midstream
( shipping and regasification )
Scope 3 Scope 1 and 2
Downstream
( combustion at the power plant )
Scope 3 Scope 3
Scope 3
End User Scope 3 Scope 3 Scope 1 and 2
Participants in the LNG value-chain have entered into a range of “ scoped ” offsets , primarily in the spot market , with some transactions just covering the buyer ’ s Scope 1 and 2 emissions , and with others covering Scope 1 , 2 and 3 emissions . There are signs that this may expand beyond the spot market into long-term LNG sale and purchase agreements , with Shell signing an LNG SPA with Petrochina for the supply of offset life-cycle CO2e emissions generated across the value chain ( i . e . for Petrochina ’ s Scope 1 , 2 and 3 emissions ). Recently US LNG
13 . UK Oil and Gas Authority , “ Platform Electrification ”, https :// www . ogauthority . co . uk / the-move-to-net-zero / platform-electrification /
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