<article><p class="lead">"Carbon-neutral" LNG cargoes may account for a large share of the global LNG market by the end of the decade, LNG industry participants said. </p><p>Sales of LNG cargoes that include the purchase of carbon credits intended to offset the cargo's carbon footprint have accelerated in recent months and will continue to grow in the coming years as they are an unavoidable part of the energy transition, delegates at the CWC World LNG summit in Rome heard. </p><p>Most LNG cargoes sold in the market could be "carbon-neutral" within 10 years, RWE Supply and Trading global head of LNG Javier Moret said. "Carbon-neutral" cargoes "will be mainstream" by 2030, although this could still mean accounting for "25pc or 75pc of the total", Aramco Trading LNG trading manager Garth Edwards said. Growth in carbon-offset cargoes may accelerate sharply in the event of voluntary demand being replaced by compliance-driven demand, he said. Aramco has already delivered some "carbon-neutral" LNG cargoes, and this is an area that the firm is interested in expanding, Edwards said. </p><p>Deliveries of LNG cargoes labelled as "carbon-neutral" have come under scrutiny from within the industry in recent months, with participants calling for greater transparency and standardisation in such transactions. </p><p>Quantification of the carbon content of an LNG cargo has become less of an issue as the industry has made substantial progress on that, RWE LNG origination manager Julian Flamig said. Emissions associated with a standard-sized LNG cargo are around 250,000t, Edwards said. </p><p>But there are still issues around whether "scope 3" emissions — associated with the end use of the fuel, as opposed to those emissions stemming from production and shipping — are included in the quantification of cargoes' carbon footprints. Scope 3 emissions account for 74pc of an LNG cargo's emissions, Shell executive vice-president Steve Hill said. Shell has delivered a number of "carbon-neutral" LNG cargoes in recent months, with the company purchasing carbon credits for 100pc of the cargoes' carbon footprint, Hill said. </p><p>By contrast, the lack of standardisation in carbon credits is cited as a more complex issue, as "no two offsets are the same", Flamig said. This requires firms to engage in lengthy negotiations that are not compatible with the need to catch opportunities in the LNG market, he said. And there is a wide range of projects generating carbon offset certificates — either through removal, such as reforestation projects, or avoidance, such as renewable generation projects. Even some gas-fired generation plants in India and China have been offering offset certificates, on the basis that they provide carbon savings compared with coal-fired generators, Melissa Lindsay, founder of LNG and Voluntary Emission Reductions (VER) brokerage platform Emstream and Emsurge, said. Emstream has been active in the carbon offsets market, trading certificates equivalent to around 2.3mn t of CO2 — or around nine standard-sized LNG cargoes.</p><p>While neutralising the carbon content of cargoes through carbon credits may become standard practice in the long term, industry participants have flagged the risk of creating a "two-tier" market in the short term — with "carbon-neutral" cargoes commanding a significant premium to standard ones. Offsetting emissions from the entire value chain of an LNG cargo adds around $3.75mn to the full cargo value or approximately $1/mn Btu, Edwards said, suggesting carbon certificates are priced at around $15/t of CO2. </p><p>But the prospect of a rapid increase in demand for "carbon-neutral" LNG cargoes in the coming years raises questions about the scalability of the carbon offsets market. Generating sufficient certificates to offset the size of the LNG industry at present is estimated to require planting around 1.5bn trees every year, industry participants said. "If everyone only wants to invest in nature-based projects, there is simply not enough land," Lindsay said. While some of these emissions are likely to be offset through other tools, there is still a need for more investments and research in new solutions, she said. </p><p class="bylines">By Antonio Peciccia</p></article>
