Strategic and Commercial Implications of GHG Emissions Intensity

Energy transition policies and ESG [environmental, social, and governance] standards no longer provide unconditional support for natural gas and LNG [liquefied natural gas] investment, production, and consumption because vented and fugitive methane is a leading contributor to climate change. Nevertheless, any realistic, reliable, and cost-effective transition to a net-zero world requires a robust contribution from such “clean” hydrocarbons. To fulfil this role, natural gas and LNG market participants increasingly must demonstrate that they measure, monitor, and abate both CO₂ and CH₄ emissions to the greatest extent possible using emerging technologies and best practices.

Our analysis indicates that the volume or energy unit cost to measure, monitor, and abate GHGs pales in comparison to the economic cost of not doing so, given the proliferation of emissions penalties and fees, increasing GHG [greenhouse gas] trading prices, emerging border adjustments and taxes, and ESG standards and financing costs. Further, the all-in GHG intensity of fuel supplies is becoming a source of commercial value and competitive differentiation as natural gas and LNG buyers seek to reduce the GHG footprint of their supply portfolios.

Christopher Goncalves, Athanasia Arapogianni Konisti, and Mark Jordan evaluate and compare the all-in GHG intensity of leading natural gas and LNG trade routes to that of leading coal supply routes. They also compare GHG emissions penalties, taxes, and price adjustments to estimated measurement, monitoring, and abatement costs. Finally, they draw conclusions about the commercial incentives and economic benefits of achieving the GHG mitigation imperatives that now confront the natural gas and LNG industry.

This paper was first presented at the 20th International Conference & Exhibition on Liquefied Natural Gas (LNG2023) in July 2023.