IEEJ：February 2021 © IEEJ2021

The Future of Natural Gas and LNG: aremethane emissions a big problem?
Professor Jonathan Stern
Distinguished Research Fellow

IEEJ GLOBAL WEBINAR, FEBRUARY 9, 2021

NATURAL GAS PROGRAMME

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AGENDA• Importance of methane emissions• The future of natural gas under net zero targets• Difficulties and complexities of data;measurement reporting and verification• The EU Methane Strategy• Emissions from LNG value chains: carbon
neutral LNG and the Pavilion initiative• Conclusions

METHANE EMISSIONS AND LNG DECARBONISATIONSPONSOR’S VISIT, 2020

Methane Emissions: steadily increasing
since 2005
Global Monthly Mean Atmospheric Methane Concentrations 1983-2020

Source: Earth System ResearchLaboratory, NOAA/ESRLMethane emissions have been rising rapidly over the past
decade, data for 2008-17 show an increase inanthropogenic methane 60% of which is agriculture andGAS PROGRAMME
40% fossil fuels, of which 57% oil andSPONSOR’S
gas VISIT, 2020

Especially important for substitution of coal byimported natural gas and LNG• Combustion of natural gas emits 45% less CO2 than coal and
25% less CO2 than oil BUT..adding methane emissions (to gasand coal) will impact these figures. Taking methane emissions
into account the IEA says that on average:– coal-to-gas switching reduces emissions by 50% when producing
electricity and by 33% when providing heat;– electricity produced from gas that has been transported as LNG resultson average in 45% lower GHG emissions than coal.

But `average’ is not useful, what importers need to know is:• What is the GHG content of the coal (or oil) that they are
currently using compared with..
• the GHG content of the natural gas or LNG imports which will
be replacing the coal (or oil)
Policy and regulation needs to be based on
accurate measurement not averages

The Future of Natural Gas andLNG under Net Zero Targets

METHANE EMISSIONS AND LNG DECARBONISATION

5EU Gas Demand to 2050 Under COP21 and Net ZeroScenarios

COP21+ means stable demand up to 2025-2030 then sharp decline;
Net Zero means decline of 25% by 2030 accelerating thereafter
LONGER TERM IMPACTS OF ENERGY TRANSITION

NATURAL GAS PROGRAMME

6Shell Sky Scenario for non-European Gas DemandSource: Shell Sky Scenario

Note that Indian demand never rises above 100 bcm and Chinesedemand collapses post-2040, Middle East over 400 Bcm in 2050;
Latin America over 400 bcm in 2040
LONGER TERM IMPACTS OF ENERGY TRANSITION

NATURAL GAS PROGRAMME

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BP Net Zero Scenario for Non-European Gas DemandSource: BP Energy Outlook 2020

Note Indian demand is 250 bcm by 2050, China steady at >500
Bcm; Middle East below 200 Bcm; North America and Russia
much lower by 2040 than in other scenarios
LONGER TERM IMPACTS OF ENERGY TRANSITION

NATURAL GAS PROGRAMME8CONCLUSION: net zero global
energy models can result in very
different outcomes for regional gas
demand in 2050. The GHG
footprint of natural gas and LNG
will determine its future indifferent countries
METHANE EMISSIONS AND LNG DECARBONISATION

9Difficulties and Complexities
of Data and Measurement

METHANE EMISSIONS AND LNG DECARBONISATION

10Greenhouse Gas Emissions: the global warming
potential (GWP) of methane relative to CO2

Source: Balcombe et al. (2015)

IPCC AR5 (and most of the fossil fuel literature) uses a
100 year time horizon ie 28 x CO2 For a 20 year time
horizon the GWP would be 84 times that of CO2

Major Sources of Methane Emissions from Fossil Fuels:
data availability• VENTING: from oil and gas production and processing(tends to be deliberate)• FLARING: particularly from gas associated with oil
production, mainly CO2 but can include methane andother uncombusted gases• FUGITIVE: emissions (usually unintended) from gas
pipelines and LNG (liquefaction, shipping andregasification)
TWO MAIN SOURCES OF DATA:• UNFCCC: 30-year time series and full chain, but
inconsistent and with countries (mostly) limited toAnnex 1• IEA Methane Tracker: short time series, upstream
only, but consistent and includes many more countries

Methodologies for Measuring Methane:bottom-up (ground level) and top-down (aerial)• Bottom-up (ground level) measurement:– Advantages: low cost, highly location-specific (notcontaminated by other sources of methane) and can be
24/7 so will capture occasional but potentially verystrong emission episodes– Disadvantages: may not be capturing all emissions eg
venting and uncombusted flares, offshore limits• Top-down (remote) – aeroplane overflights, satellites,
drones:– Advantages: identifies emissions which need
explanation not registered at ground level– Disadvantages: insufficiently location-specific, lowreporting frequency may not capture key episodes
Verification requires reconciliation of bottom-up andtop-down measurements

Reporting and Verification
REPORTING:• Impossible to separately report oil and gas emissions for
associated gas production; some countries report allmethane emissions as oil- (not gas-) related• Coal emissions hardly reported, very important for claims ofGHG reduction from coal to gas/LNG switching
VERIFICATION:• Current verification is mostly accountancy-based ie checking
data collected by companies• Future verification needs to be based on replication ofemission measurements based on sample testing byaccredited independent organisations
The IEA Methane Tracker (January 2021):“data are poor, incomplete and contradictory”

Average Upstream Methane Intensity of Major Gas
and LNG Exporters to EU Countries (2020)
Source: IEA Methane Tracker (2021)

This is national intensity from oil and gas exploration andproduction only; not intensity from gas and LNG exports
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THE EU METHANE STRATEGY (October 2020)is principally concerned with Measurement,
Reporting and Verification (MRV)
EU domestic gas production is falling rapidly
hence the focus on methane emissions fromimports (upstream+transportation), said to be
3-8 times those of domestic emissions
METHANE EMISSIONS AND LNG DECARBONISATION

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Elements of the EU Methane Strategy (2020)
••
•
••
••
•

The Strategy covers energy, agriculture and waste
Energy: all sources – oil, fossil gas, coal, pipeline gas, LNG, storage
Biogas must be based on waste/residues, not food or feed crops
Make Tier 3 the `benchmark standard’– satellite data sharing (using Copernicus)
can identify and eliminate super-emitters
Voluntary initiatives: Oil and Gas Methane Partnership (OGMP) is the best
existing framework – extend through the value chain
Create a global Methane Observatory to establishment an `independent andqualified international methane emissions mechanism’ (UNEP based on OGMP
principles) within the CCAC
Legislation will require: obligations to report, repair (LDAR improvement),
transparency of methodology and data; `routine’ venting and flaring to bebanned by 2025, transportation and coal mines to be addressed later
Proposes a coalition of importing countries (China, Japan, South Korea) to`coordinate energy sector methane emissions’
Likely timeline: publication of draft legislation end-2021, agreement
METHANE
AND LNG
DECARBONISATION
byEMISSIONS
Councilend
2022, transposed into national legislation 2024-25 17

The EU Methane Strategy: persuasion versus compulsion
EXPORTERS:
Persuasion: “The EU will lead a diplomatic outreach campaign tofossil fuel producer countries and companies… technical assistance..”
Compulsion: “the Commission will propose to use a default value forvolumes that do not have adequate MRV systems in place..[it] will beapplied where necessary until a compulsory MRV framework for allenergy-related methane emissions..is implemented…In the absenceof significant [MRV] commitments from international partners, theCommission will consider proposing legislation on targets, standards
or other incentives for fossil energy consumed and imported in theEU.”
Persuasion is likely to work better (and faster!) than compulsion;
compulsion means there is potential for years to be spent on
extra-territoriality/WTO discrimination legal arguments
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Strategy needs to focus on different emissions profiles
from different export supply chains• Russia Pipeline: Nord Stream, Yamal-Europe, Ukraine• Russia LNG: Yamal LNG, Sakhalin LNG• US LNG: different supply sources (Permian, Gulf of Mexico,other) arriving through different pipelines to individualliquefaction terminals (Sabine Pass, Cameron, Freeport)• Algeria: pipeline and LNG deliveries from Hassi R’Mel and Hassi
Mesaoud via different pipelines (trans-Mediterranean andGME) and/or different LNG terminals (Arzew, Skikda)
Estimating emissions from gas and LNG delivered via
specific export supply chains will be complex, but mucheasier than trying to agree a `national’ emission standard
defined by a global body19Countries and Companies which delivered
significant pipeline gas and LNG to the EU (2019)
COUNTRYCOMPANIES WHICH DELIVERED SIGNIFICANT VOLUMES OFPIPELINE GAS AND LNG TO EUROPEAN CUSTOMERS IN 2019

MEDIUM AND LONG TERM CONTRACTSRussia
NorwayAlgeria
Qatar
NigeriaUnited States
Azerbaijan
Trinidad
Libya*Gazprom, Novatek
Equinor
Sonatrach
Qatargas
Nigeria LNG
Cameron LNG, Total, CheniereSocar
Atlantic LNG
Libyan National Oil Company
PORTFOLIO LNG SELLERS

Shell, Total, Centrica, ENI, Equinor, Iberdrola, Naturgy

The top six countries account for >90% of EU Imports;
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urgency is agreement with those governments/companies

Emissions from LNG valuechains

METHANE EMISSIONS AND LNG DECARBONISATION21

LNG: the Value Chain
Exploration and Production
Pipeline from field to Liquefaction plant

Source: GIIGNL (2019)

Emissions from the whole value chain need to be measured:• From exploration and production to the delivery point (regasterminal or DES – Scope 1 and 2 emissions) are the most important
for the industry to measure• Data are often confidential/unavailable
METHANE EMISSIONS AND LNG DECARBONISATION

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Why have emissions from LNG trade become
important in the context of decarbonisation?
• Increasing share of LNG in total natural gas trade• Increasing concern from importers about
upstream emissions in exporting countries –where data may not be available (and very highemissions may be suspected)• Because of the energy needed for liquefaction,around 8-12% of gas produced at the wellhead(significantly higher than pipeline gas) and canbe much higher for FLNG
Methane emissions from the LNG value chain cansignificantly increase the total GHG footprint
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Feedgas Use in Asian LNG Projects** Energy needed to generate electricity to run the plant and fuel the liquefaction
process.
Source: Wood Mac

Big variations in percentage losses for different
projects, up to 30% for some FLNG projects 24

Source: UK OGA25

Seven `Carbon-Neutral’ LNG cargos via (mainly)
forest offsets all in Asia, 2019-20*• Shell-Tokyo Gas (June 2019) delivery in Japan (1)• Shell-GS Energy (June 2019) delivery in South Korea (1)• Jera Global Markets - Adnoc (June 2019) delivery in India• Shell-CPC (March 2020) delivery in Taiwan (1)• Shell-CNOOC (June 2020) delivery in China (2)• Total-CNOOC (October 2020) delivery in China (1)***The Shell and Total cargoes offset emissions from extraction to regasification; the Jera cargo
only offset emissions from the regas terminal downstream **part forest/part wind power offsetWere these cargos carbon-neutral or GHG-neutral?
No details of: measurement methodologies, emissions per cargo,volume/value of offsets, verification of data
Additional cost per cargo estimated at $2.4m = $0.7-0.8/Mmbtu
Are offsets realistic on a large scale for LNG contracts?
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Pavilion LNG (Singapore) tender for 2mt of LNG
with defined GHG content to commence 2023
• Long term contract tender – 25 offers of supply• Not `carbon neutral’ but cargos with defined GHGcontent from wellhead to delivery point• First contract won by Qatar Petroleum Trading
1.8mt/year for 10 years – each cargo will have astatement of GHG emissions from wellhead(additional contracts anticipated)• Standardised measurement and verification
methodology to be published
Potential to become a standard methodology for GHG
emissions from LNG cargos

CONCLUSIONSMETHANE EMISSIONS AND LNG DECARBONISATION

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OXFORD INSTITUTE FOR ENERGY STUDIES Natural Gas Research Programme

Different Approaches to Methane
Emissions Reduction
 GLOBAL – UN Observatory will collect, collateand publish national emissions data EU Regulatory Approach:EU Methane Strategy will require MRV for EU
imports of (all fossil fuels but focussed on)
natural gas and LNG; this may be completely
different to national data Corporate (per cargo) Approach (Asia):

Carbon-neutral LNG cargos
 Long(er) term LNG contracts with defined MRV
methodology for each cargo (could become amultilateral standard)Transparent Measurement, Reporting and Verificationof Methane Emissions: questions for companies
MEASUREMENT:• How were emissions measured: with what instruments, werebottom up and top down measurements carried out andreconciled?
REPORTING:• How have emissions been reported: by field (production),network (transmission and distribution), export/import (pipelineand LNG value chain)?
• Are they reported by fuel – oil, gas and coal?
• How are they attributed between oil and gas production?
VERIFICATION:• Which organisation has verified the emissions; was this anaccounting exercise or did it include sampling of emissions?

Confidentiality is the enemy of credibility

Are Methane Emissions from Natural Gas andLNG a Big Problem?
• In some respects – NO – methane emissions from agriculture(and in some countries waste) are a bigger problem BUT..
• methane emissions from natural gas and LNG can be reduced
much more quickly and at much lower cost than from agriculture• If natural gas and LNG companies fail to respond to calls toreduce methane emissions then the fuel may be phased out
faster, certainly in Europe and possibly in Asia

Methane emissions are considered a `bigproblem’ by governments and environmentalgroups, therefore they are a big problem fornatural gas and LNG companies, and net zerotargets mean this problem will get bigger

OXFORD INSTITUTE FOR ENERGY STUDIES Natural Gas Research Programme

Paper and Podcast
available atwww.oxfordenergy.org

JONATHAN.STERN@OXFORDENERGY.ORG
Contact: report@tky.ieej.or.jp