LNG to be biggest source of carbon emission growth by 2025, study says
London — Liquefied natural gas (LNG) will be the biggest source of carbon emission growth for the world’s top oil and gas companies by 2025, according to a new study by Wood Mackenzie, as demand for the super-chilled fuel is set to rise sharply.
Oil and gas companies such as ExxonMobil, Royal Dutch Shell and Total have promoted natural gas as a cleaner fossil fuel that will displace coal to meet growing demand for energy as the world shifts away from fossil fuels in the coming decades. But converting natural gas into LNG by cooling it to minus 160°C to transport it to demand centres is a highly energy-intensive and thus emission-intensive process, according to Wood Mackenzie analyst, Amy Bowe.
Capping emissions of heat-trapping gases by the oil and gas industry has moved to the forefront of investors’ agendas in the wake of the 2015 Paris climate agreement to limit global warming to below 2°C by the end of the century. Companies are coming under growing pressure to tackle emissions from flaring excess gas at oil fields, as well as to limit the emissions of methane, a highly potent greenhouse gas, from pipelines and LNG terminals.
Wood Mackenzie, the Edinburgh-based oil and gas industry consultancy, noted in a study that emissions from oil and gas production operations of 25 of the world’s top energy companies are nevertheless expected to rise by 17% by 2025. Fossil fuel output will increase by 15% over the same period.
Emissions resulting from LNG production are forecast to grow by 43% over the period compared with a 22% increase in supply, "representing the largest absolute increase in emissions", according to the report.
About 10% of gas processed by an LNG terminal is lost into the atmosphere, Bowe said in an interview. "If you look at the emissions produced just through the extraction and production of it, LNG is more emissions-intensive than pipeline gas and that is largely due to the liquefaction process," Bowe told Reuters.
Global demand for LNG could increase from about 240-million tonnes a year to about 430-million tonnes by 2025, according to Shell, the world’s largest LNG trader. However, despite its large contribution to carbon emissions, LNG remains the least polluting fossil fuel when taking into account the full chain of production, delivery and consumption, primarily for producing electricity, Bowe said.
"If we were to look full-cycle at the emissions produced through the consumption of fuels, we would expect LNG to still be more favourable," Bowe said. "Compared to coal, LNG is still much more favourable on a full-cycle basis."
The growth in emissions is also driven by a wave of investments in heavy oil projects such as Canada’s oil sands, according to the study.
Wood Mackenzie also estimated that about $45bn of oil and gas projects representing some 2.3% of fossil fuel reserves of firms surveyed are at risk of not getting the green light by 2025 because of their high carbon emissions. The number, based on a tax of $40 per tonne of carbon, represents a fraction of other estimates of so-called "stranded" fossil fuel assets.
Conventional onshore oil and gas fields will remain the largest single source of production and emissions by 2025, although their share of the total will diminish as fields age, according to the study.