Carbon-neutral LNG suffers from 'credibility gap' - think tank

Quantum Commodity Intelligence - Carbon-neutral liquefied natural gas deals will at best play a minor role in addressing emissions from the industry and suffer from a 'credibility gap', according to a report from the Center for Strategic and International Studies (CSIS) published this week.

Around 35 such deals have taken place since 2019 and Shell and PetroChina signed the first long-term offtake agreement last year.

But the CSIS listed four major concerns with such deals, including the scale of emissions per cargo that need to be offset, the quality of emissions accounting, the effectiveness of carbon offsets, and the ultimate environmental benefit of these transactions.

Each cargo is responsible for around 250,000 tonnes of CO2e in total, of which 70-75% is from the downstream combustion of the gas.

Carbon accounting remains opaque, says the CSIS, with industry players routinely calling deals 'carbon-neutral' when they only offset a portion of the cargo's emissions.

The International Group of Liquefied Natural Gas Importers suggests that cargoes should not be labelled as carbon-neutral unless they cover scope 3 indirect emissions.

Late last year, Chevron, QatarEnergy and PavilionEnergy published a methodology guide to help standardise carbon accounting, and the CSIS says this "will give a more accurate picture of the impact of a particular cargo, including its methane intensity."

A final issue is the quality of the carbon offsets being used, which sometimes lack additionality.

"Ultimately, there are no shortcuts to cutting emissions in the LNG sector. There is a growing consensus that it will be hard to build new large-scale liquefaction projects without lowering their emissions intensity," said the CSIS.

"Carbon-neutral LNG will continue to grow, since many companies are willing to shoulder an additional cost to help reduce their environmental footprint. But at best, it will play a secondary role in addressing global emissions from the LNG industry and will not contribute much to decarbonization efforts."