GASTECH 2024: Tackling methane emissions key to securing LNG’s future

• Cutting methane emissions can boost LNG’s reputation as ‘transition fuel’
• Older LNG plants in US generate more emissions than newer facilities in Middle East and Asia
• Emissions intensity could impact LNG prices

Reducing methane emissions in the LNG supply chain is vital to LNG’s future, Gas Strategies managing consultant David Drury told the Gastech conference in Houston yesterday.

As the world focuses on net-zero goals, LNG has often been positioned as a ‘transition fuel’ that can help economies reduce their reliance on emissions-heavy coal.  

But uncertainties over the level of methane emissions associated with LNG could undermine this stance, Drury said at the Low Carbon LNG panel on Wednesday.

With increased scrutiny of the entire LNG chain, from drilling to delivery, the industry must tackle the comparatively “low-hanging fruit” of cutting methane emissions, he added.

“We have seen a huge acceleration in recent transactions in the emphasis on greenhouse gas emissions from projects – a subject which, five years ago, was hardly mentioned,” Drury told the panel.

Almost every new project includes investment to minimise emissions, which usually attracts interest from equity investors and project finance lenders, he noted.

“The upshot of this is that there is scope for the methane issue becoming even more threatening to the future of natural gas as a transition fuel – and this is aside from the issue of specific regulation penalising high methane intensities.”

The US administration's freeze on new LNG export licences to non-Free Trade Agreement countries, introduced at the beginning of this year, was reportedly triggered in part by concerns around the impact of methane emissions.

Measuring methane emissions

Methane leaks can occur at liquefaction facilities from gas service valves, reciprocating compressors, pump seals or metering equipment as well as during the transfer of LNG from the facility to the ship, according to the International Energy Agency (IEA). In the US, methane release from fracking operations and flaring of associated gas are significant contributors.

According to Drury, accurately measuring methane emissions has been challenging. But advances in technology, combined with increased industry and non-governmental organisation efforts, has helped to improve matters.

“Methane emissions are also somewhat difficult to measure directly, but over the last few years serious attempts have been made to do so using on-the-ground as well as aerial and satellite approaches,” he said. “And the results have tended to be worrying rather than reassuring.”

Estimates of US average methane  intensities ranged from around 1% to nearly 4% in the LNG sector, according to a July study citing several sources which was conducted by Natural Allies for a Clean Energy Future (NACEF) and the Partnership to Address Global Emissions (PAGE).

Methane intensity is defined as the total methane emissions from up and midstream oil and gas activities, expressed as a percentage of the total amount of marketed gas.

However, a  study by Dr Bob Howarth at Cornell University argued that LNG emissions footprint exceeds or equals that of coal. The study assumed methane leaks along the LNG chain of around 3%, whereas a typical figure used by the industry is nearer 1%, said Drury.

Howarth’s findings influenced US President Joe Biden’s decision to introduce the LNG export pause, according to a Bloomberg report. 

Although the LNG sector contributes to over 1% of global emissions from the energy sector and it among “the big emitting industries”, it can be an important “transition fuel” because it can be lower emitting than coal and more rapidly deployable than renewables, added Drury.

“That LNG can play this role in the transition is reassuring for lenders, for example, as they come under pressure to reduce, or withdraw entirely from – lending to fossil fuel projects. It is also important for the way in which legislators and regulators view LNG.”

Older vs newer LNG projects

Countries with aging infrastructure, where operating practices may not have been environmentally focussed, tend to have higher emissions. By contrast, nations with newer LNG facilities designed to reduce emissions, fare better.

“The big Middle Eastern hydrocarbon producers come out well, with Qatar having a really low methane intensity,” said Drury. “But Qatar’s main competitor as LNG producer of the future, namely the US, does not come out so well, and, what is more, there is a big variation within the US as well as from different sources.”

He added that West Canada projects have low liquefaction emissions as they use hydroelectricity to drive the compressors. Some Asia Pacific projects, with carbon capture and storage reservoirs, also have a smaller footprint.

While most new projects will have emissions-reduction features built in, it will be hard to justify such investment in older plants, nearing the end of their lifecycles, this could have an impact on buyer preferences, Drury stressed.

“This means that the goal posts are moving all the time. And, since it is hard to justify major emissions-reducing investment for older plant late in their life, the spread will arguably increase,” said Drury.  

Impact on prices

The EU’s moves to cap methane emissions and introduce the Cross Border Adjustment Mechanism (CBAM) indicates that LNG which generates fewer emissions during production can be more profitable.

“It is obviously in a project’s favour when seeking to attract long-term buyers to be able to show it is competitive in terms of emissions,” said Drury.

While there are financial and reputational advantages to tackling methane emissions, the industry’s response has been slow.

According to the IEA, methane emissions from the natural gas industry have hardly changed between 2018, when they stood at 27 mt, and 2023, when they rose to 29mt.

Although differences in emissions intensity have not translated to LNG price differences yet, that could soon change, added Drury.

“In fact, the price impact of buyer’s preferences for low emissions LNG may be felt first in the US upstream,” he said. “Trading of emissions certified gas is already underway, and the buying preferences of the US LNG producers will have an important impact on this market.” - HQ

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