Gas exporters are equally keen to find ways to offset the climate impact of their product as they battle to secure the prospects for LNG amid intensifying pressure on its environmental credentials.
The news of Total’s shipment came as Santos chief executive Kevin Gallagher met resistance from a UK climate expert on his assertion during a Credit Suisse webinar that the place of natural gas in the energy mix was secure “for decades to come”.
Lord Adair Turner, chair of the Energy Transitions Commission, a global coalition of energy leaders working to accelerate zero emissions, said on the webinar that the transition “might come a bit earlier than you think”, particularly if Joe Biden wins the US election next month. A Biden win would mean all three of the big continental blocks in the world will have commitments to reach net zero emissions by 2050 or 2060.
Shell leads the way
Shell has so far led the way in carbon-neutral LNG, making three of the previous four carbon-neutral shipments, according to Bernstein. Those included one in July 2019 from Gladstone in Queensland to Tokyo Gas in Japan, the firm noted, with the estimated 259,000 tonnes of scope one, two and three carbon emissions offset from Shell’s own offsets portfolio at an estimated cost of $US2.6 million.
The Anglo-Dutch group has built up its “nature-based solutions” division that generates carbon offsets through investments in projects that include reforestation ventures in the Netherlands and Spain.
In Australia, Shell has a venture in Queensland, which is expected to generate 90,000 carbon credit units over 25 years. In August, it signed a deal to buy Western Australia-based carbon farmer Select Carbon.
Total said carbon from its LNG shipment from Ichthys, which was delivered to Chinese national oil company CNOOC, was offset by verified carbon standard certificates generated by the Hebei Guyuan wind power project in northern China and the Kariba REDD+ forest protection project in Zimbabwe.
“This first LNG shipment, whose carbon emissions have been offset throughout the value chain, represents a new step as we seek to support our customers towards carbon neutrality,” Total senior vice-president for gas Laurent Vivier said.
He did not say who covered the cost of the offsets.
Mr Clint said offsetting emissions on LNG was “clearly a material additional cost layer”, averaging about US75¢ per million British thermal units for gas that costs $US2-$US3/MMBTU in North America or $US5-$US5/MMBTU in Europe, with shipping costing another $US1-$2/MMBTU.
Those estimates suggest that neutralising the carbon of an LNG cargo adds more than 10 per cent to the cost, and potentially more than 20 per cent depending on the price of the gas and the distance involved.
“We do suspect that over time there will be some sort of premium pricing available for these cargoes,” Mr Clint said.
He said Shell contracted in June to deliver two more carbon-neutral LNG cargoes to China, to be offset by reforestation projects in that country.
“I think it’s going to be a very important part as we talk about the decarbonisation mega-trend.”