Carbon-neutral LNG - a tool in Singapore's energy transition arsenal

BY 2028, Singapore will boast the world's largest subsea power interconnector, a 4,200 kilometre undersea cable carrying solar power from Darwin in northern Australia to Singapore, to meet around 15 per cent of the city-state's total power supply. Yet today, in the interim energy transition phase, carbon-neutral LNG offers one way for Singapore to tackle emissions from natural gas, as evidenced by Pavilion Energy recently spearheading Singapore's first carbon-neutral LNG cargo.

The subsea power cable represents one solution in which surplus renewable energy can be exported by a country endowed with natural resources to one that lacks it, and underscores the range of technological, logistical and commercial solutions that will be needed in Singapore's decarbonisation arsenal.

When Singapore switched to natural gas as its main power generation fuel, the primary consideration was air pollutants, but it also helped bring down its carbon footprint - a gas-fired power plant produces roughly half the emissions of a coal-fired power plant and 30 per cent to 50 per cent fewer emissions than burning petroleum fuels.

The next leg of Singapore's decarbonisation roadmap however is net-zero emissions, which will be challenging. The United Nations Framework Convention on Climate Change (UNFCCC) calls these challenges "national circumstances" of small island countries that have few energy sources and face difficulties in switching to alternatives.

Power generation is the second-largest contributor to Singapore's carbon emissions after the industrial sector, accounting for around 39 per cent of total emissions, according to government data. Nearly 95 per cent of Singapore's power generation comes from natural gas.

Eventually, decarbonising power will involve diverse solutions ranging from importing renewable electricity to introducing hydrogen into the energy mix, and carbon-neutral LNG is one way of tackling emissions from natural gas in the context of the energy transition.

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But how much do we know about carbon-neutral LNG? How does one go about decarbonising a shipload of natural gas that carries enough energy to heat more than 43,000 homes for an entire year? Who pays for it and does it work?

THE RACE TO LOW-CARBON FUELS

In the life cycle of natural gas, roughly a third of the emissions come from the production and transportation of the hydrocarbon, although this can vary depending on the source of the gas. The remaining emissions come from combustion.

There are two ways of "neutralising" this emissions footprint.

The first is to make the production and transportation process less energy-intensive, such as by using renewable energy at plants and cutting back on activities like flaring (burning of gas at the well-head).

Secondly, the leftover emissions footprint can then be offset by purchasing carbon credits, which despite their fragmented nature is a sector that's rapidly becoming more organised and robust.

The oil and gas industry, under pressure to validate its social licence, has been working on reducing its share of emissions.

We are not just looking at a race to decarbonise natural gas, but also to "demethanise" natural gas. The "carbon-neutral" LNG cargo of the future will be "methane-neutral" as gas producers have been warning of a global backlash against methane emissions for years.

In the US, gas field operators, especially in the northeast, are being pushed to certify 100 per cent of their natural gas operations as socially responsible, not only to appease investors but also to meet tightening regulations that could potentially put a lot of unprepared companies underwater.

Technologies to monitor methane emissions are developing rapidly, such as Project Canary that tracks fugitive emissions and the Sentinel-2 and Sentinel-5P satellites that detect methane leaks from space. There is traction on the demand side to decarbonise gas too.

Pavilion Energy imported Singapore's first carbon-neutral LNG cargo in April this year. It has also asked its gas suppliers like Qatar Petroleum and Chevron to provide a statement of greenhouse gas emissions measured from the source of gas production until it is delivered to the port.

The details on emissions measurement are critical, because they will allow Singapore to choose the gas supplier with the lowest carbon footprint, calculate the cost of carbon offsets and the emissions of every megawatt of power generated.

A complete overnight solution to carbon emissions is neither possible nor practicable, but tools like carbon-neutral LNG will kick-start the process of eliminating highly energy intensive gas producers from the picture by measuring and putting a price on carbon.

These efforts will pave the way for the Singapore Green Plan 2030 that aims to strengthen climate change commitments through cleaner energy and lowering the carbon footprint.

In the rest of Asia, China's national oil companies have been experimenting with auctions of carbon-neutral LNG on domestic exchanges, and Japanese gas importers are in discussions with downstream customers for the supply of low-carbon gas. The Japanese government is working to formalise a mechanism that could allow the usage of carbon credits from carbon-neutral LNG to offset future emissions obligations.

QUESTIONABLE TRADES

In the global LNG market, around 20 carbon-neutral cargoes have been publicly announced. This carbon-neutral LNG carries a price premium that corresponds with its emissions footprint.

These prices bring new transparency to help market participants across the LNG value chain understand the carbon cost associated with LNG.

Carbon-neutral trades in the industry have been shrouded in secrecy, despite growing market interest, and companies have not publicly disclosed the underlying carbon prices, emissions measurement and carbon offsets. This opaqueness and lack of disclosure is harmful to the industry and obstructs genuine efforts to decarbonise natural gas.

Oil and gas companies are protective of their emissions and field data, and aware that certain types of upstream operations could be more emissions-intensive than others, while some carbon-neutral trades have raised concerns of "greenwashing".

Yet there remains widespread debate within the industry about carbon-neutral LNG, with attitudes varying significantly. According to the Oxford Institute for Energy Studies, some companies publicly describe it as a practical means toward decarbonisation yet others take a less open or enthusiastic approach, referring to carbon offsets as a last resort in industry talks.

The immediate challenge for the industry is to address these issues so that criticism, including that of "greenwashing", is countered and the future carbon-neutral LNG trades are scaled up and executed in a more transparent manner that can be accurately measured.

• The writer is LNG team lead at S&P Global Platts.

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