What The President’s Permit Pause Means for The Golden Age of Liquefied Natural Gas
02.02.2024 By Tank Terminals - NEWS

February 02, 2024 [Forbes]- The Biden administration, under its view that climate change is an existential threat, has taken action on an LNG dilemma. On January 26, 2024 President Biden paused all approvals to permit new LNG export projects.

 

The U.S. Department of Energy (DOE) says it needs to update its approval process which includes domestic supply, energy security, and greenhouse gas (GHG) emissions. The order calls for a pause that is temporary and will be followed by a period for public response, and will not likely be resolved until after end-of-year elections. This has caused consternation within the oil and gas industry. Here are some facts that may clarify the government’s actions.

 

Leaky footprint of natural gas and LNG.

When oil and gas are around, methane leaks abound – from wellheads, storage tanks, pipelines, and refineries. This is important to the U.S. government because methane heats the atmosphere up to 80 times more than its big greenhouse gas sister, CO2.

The UN highlighted worldwide methane emissions in a comprehensive report. Worldwide, 60% of methane emissions come from man-made sources. Fossil fuels contribute a third of this (20%) and oil and gas makes up two-thirds of that (13% of total man-made methane emissions). An independent estimate is 7%. Oil and gas is only responsible for 7-13% of all global methane emissions. But methane’s warming effect on the atmosphere is disproportionately high, causing 25% of global warming, according to EDF.

For comparison, in the U.S. oil and gas is responsible for about 30% of all man-made methane emissions. This is a much higher fraction than the global number, and must reflect the huge role of the oil and gas industry in the U.S.

 

The EDF Contribution.

Nobody has contributed more to make the world aware of the methane danger than the Environmental Defense Fund (EDF).

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EDF unwrapped the science. “The amount of warming over the long term is important, but so is the speed of warming,” said Dr Ilessa Ocko, senior climate scientist of EDF. “By overlooking the near-term warming from methane, we’re missing an opportunity to make a real difference right now, in our lifetime. This truly is the methane moment.”

The UN picked up the baton and carried it all the way to COP27 in Scotland. More recently, COP28 in Dubai has also formalized the methane issue. Fifty oil companies pledged to achieve net-zero methane emissions by 2030 and to end routine flaring from active oil or gas wells. These fifty oil companies amount to half of global production of oil, so their agreement is highly significant. If the pledge succeeds, it will avoid a rise of 0.1 C degrees, equivalent to about 5 years temperature rise under present conditions.

 

Satellite surveillance and super-emitters.

EDF’s emphasis on measurement of methane emissions has been invaluable to the oil and gas industry who had been flying blind. Ground-based and satellite detectors have provided numbers, locations, and sources of emission plumes. The plume in Figure 2 enabled the operator to confirm and repair the leak.

A new study, based on measurements of methane emissions from the European Space Agency’s Sentinel-5P satellite, listed eight countries that have methane intensities of 5-25%, much higher than the global average of 2.4%. The countries are Venezuela, Turkmenistan, Uzbekistan, Angola, Iraq, Ukraine, Nigeria and Mexico. This cries out for better regulation to lower methane leaks which are eminently fixable.

MethaneSAT, a subsidiary of EDF, is planned to be launched by SpaceX in early 2024. It will concentrate on emissions from the oil and gas industry, especially lower emissions from many sources that can add up to a serious overall level.

 

How fed actions may affect the golden age of LNG.

The golden age of LNG has come about because of the need for energy security for the EU after Russia’s war on Ukraine, as well as LNG displacing coal-fired power plants in Southeast Asia and China. An insightful article by Bloomberg epitomizes this LNG boom. QatarEnergy and its backers are investing $45 billion (yes that’s billion) to expand the country’s LNG exports, although its already one of the top three LNG exporters in the world – along with Australia and the U.S. A Japanese firm building the expansion has enlisted 30,000 workers from 50 countries.

Four other huge LNG expansions are planned in Louisiana and Texas: Plaquemines, Rio Grande, Port Arthur and Golden Pass. In a few years, by adding 80 million tons of capacity, the U.S. will separate as the top LNG exporter.

Can the fed pause in LNG impact the LNG industry? Yes, according to Bloomberg. The development of an LNG project is fraught with uncertainties, especially the lengthy timeframe of LNG. LNG developers in the U.S., such as Cheniere, try to get contract commitments from customers that last 10 years or even longer – before they go about finding investors in a new project. But they understand if they expand too fast they risk a glut in the market. If they move too slow, they risk the market switching to coal. The fed pause kicks in a new uncertainty about the future of LNG.

Can the fed pause reduce greenhouse gas emissions? IEA has estimated emissions from all existing LNG facilities, including burning of the LNG, and come up with 1.5 billion metric tons per year of CO2 equivalent, Bloomberg said. This is 3.8% of total global emissions. For 300 million tons of new LNG permitted facilities, this would raise the stakes by an extra 1.2 billion metric tons of CO2 equivalent, or 3.0% of global total. The grand total of LNG emissions would then be almost 7% of global. This needs to be rationalized.

Bill McKibben, famous for his opposition to the Keystone XL oil pipeline, has protested the LNG expansion. “No one can sign a paper that says it’s time to transition from fossil fuels and then permit” new U.S. projects that will add to global emissions, McKibben said.

This is a dilemma for governments. On one hand, LNG provides energy security and reduces emissions by displacing coal-fired power plants. On the other hand, LNG causes carbon emissions, first, from methane leaks in LNG production and distribution and, second, from CO2 when LNG is burned.

 

What has been the response to the fed permit pause?

Does this disable the golden age for LNG? No, as projects that have been permitted won’t be affected directly. Almost 50 billion cubic feet per day (Bcfd) have already been approved for the U.S., which is 3.4 times greater than current capacity, so this huge boost won’t be affected. This will assuage concerns from the EU and Southeast Asia about their plans for energy security based on cleaner LNG rather than coal.

However, the Calcasieu Pass 2 LNG project has been paused which is significant because it was due to go online in 2026 as the largest LNG export plant in the U.S. Surprisingly, alone it would liquefy roughly 4% of U.S. natural gas that was produced in 2022.

The U.S. exports 5 Bcfd to Mexico by pipeline. Some of this gas is used to make LNG in the country’s liquefaction facilities. It’s ironic that U.S. natural gas will be used to support Mexico’s LNG exports that might get a boost due to the DOE pause in U.S. LNG exports.

Predictably, businesses invested in LNG were critical of Biden’s pause in new LNG projects. They worried about promises made to U.S. allies such as EU, and adding uncertainties to expanding markets in the U.S.

 

A partial solution.

So, is there a rational solution for the pause in permits for new LNG ventures? Yes, at least for the leaky part of LNG, which refers to emissions connected with natural gas production and distribution. These leaks are not difficult to repair, can be done quickly, and the cost is inexpensive. One example is RSG or responsibly sourced gas. Another name for this is certified gas, which has been certified by an independent third-party to have been produced and distributed with verified lower methane leaks.

Gas +1.4% can also be certified by a company internally. In 2021, a BP vessel shipped it’s latest LNG cargo to Southeast Asia and certified it as “carbon offset LNG”. They estimated all GHG emissions from well production to unloading terminal, and then retired equivalent credits from its internal carbon-trading portfolio.

A natural gas certification program was announced in spring of 2023 by MiQ. The program assesses all GHG emissions from the entire LNG supply chain: methane, CO2, and nitrous oxides. Georges Tijbosch, CEO of MiQ, claims the system has been used to certify almost 20% of onshore gas production in the U.S. BP has certified all of its U.S. onshore gas production.

Note, however, natural gas or LNG still burns to CO2 when it is consumed by gas-fired power plants or used to heat homes and offices. It is not a clean green fuel, even though it releases only half of carbon emissions that comes from burning oil or coal. This issue will have to be rationalized before the U.S. administration undo the pause in permitting new LNG projects.

 

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