What role will liquified natural gas play in a greener energy system?

What role will liquified natural gas play in a greener energy system?
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Natural gas was hailed as a “bridge fuel” or even “destination fuel” to a cleaner energy future not so long ago. Now it is in the environmental firing line of the developed world. Last month, Michael BloombergMichael Rubens BloombergDemocrats' debate divisions open the race to new (or old) faces Judge Judy: Bloomberg as president could help US heal Bloomberg: Voters must demand 2020 Democrats explain how they will implement their plans MORE announced a $500 million commitment to his “Beyond Carbon” campaign, which goes beyond the closure of all U.S. coal plants by 2030, seeking also to prevent construction of any new natural gas plants.

Natural gas has played a decisive role in U.S. CO2 emissions reductions since 2005 and in reducing air pollution in Beijing since 2013, as in both cases coal use has declined. But it is still up for debate whether the fuel is a climate friend or foe, and the answer varies widely depending on where we sit in the world and what alternative fuels are available.

As the Organisation for Economic Co-operation and Development (OECD) focuses increasingly on the climate impact of activities ranging from milk drinking to data storage, the natural gas industry has to ramp up efforts to shape the narrative on its role in energy transition, first and foremost by “greening” its product and reducing emissions throughout the value chain. With the U.S. becoming one of the world’s largest liquified natural gas (LNG) exporters, there will be increased scrutiny on greenhouse gas emissions from extraction, liquefaction, shipping, regasifying and storing.

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Energy is already a complex subject but competing narratives on natural gas’s role in the greening of our energy system cast the fuel in widely different roles, making it even harder for policymakers, investors and citizens to navigate. 

Among environmental activists and the most climate-conscious governments, there is an urgency to transition now to a low-carbon economy. In this context, hydrocarbons are best left in the ground lest they become “white elephant” infrastructure projects in a not-so-distant future, when gas is the next coal — a dirty relic.

Meanwhile, governments in many developing countries see LNG imports as a way to improve energy access and spur economic growth, lifting people out of poverty and reducing CO2 emissions and air pollution by displacing coal and other dirtier fuels. Oil and gas companies see fossil fuels as necessary until engineers solve renewable intermittency problems and improve electricity storage. In their view, gas is the best backup power source to support renewables and the quickest and cheapest way, at least for now, to reduce carbon emissions. They anticipate strong growth in demand for gas relative to other fuels.

No one can say with certainty which view is correct, how long it will take to meet the world’s future primary energy consumption needs solely with renewables, or what role fossil fuels and the companies that produce them will play in the transition. But what is clear is that consumers and major industries are moving inexorably towards a more climate-friendly future, which in turn requires that the gas industry beef up sustainability efforts sooner rather than later.

What started as a defensive strategy to preempt attacks from climate activists is now necessary to guarantee the industry’s long-term viability. LNG players that address environmental concerns proactively and at an early stage are more likely to remain competitive over the long term, attracting more environmentally conscious investors and sustainability-conscious buyers. 

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Gas industry players are implementing a range of new strategies to boost their green profiles, going beyond tried and tested efforts to reduce methane leakage, deploy carbon capture and storage at liquefaction sites, and planting trees to offset carbon emissions. Some companies are taking more decisive action to cut emissions at the processing stage, trading “carbon neutral” LNG cargoes, and seeking other ways to earn carbon credits for their gas projects. 

LNG project developers, such as LNG Canada, are exploring cleaner fuels to power compressors and liquefaction facilities. GS Energy and Tokyo Gas received each world’s first carbon neutral LNG cargoes from Shell this July. The industry is also using innovations, from bio-LNG to hydrogen (blue and green), which hold promise as a way for gas to play a constructive role in a decarbonizing world. Though hydrogen as an energy source is still a ways away,  longer-term, natural gas could become a feedstock for the hydrogen economy. 

Laying the groundwork now for going greener will pay off in the long term, especially as decarbonization campaigns gain traction among investors. But it remains to be seen whether these efforts will help mitigate environmental opposition. Companies will have to go beyond public relations/corporate social responsibility window dressing to be deemed credible and committed to low-carbon economy goals.

Energy transition means different things in different parts of the world, and its significance varies community by community. There is not one, but several ways to achieve a lower-carbon future and that’s why radical positions won’t be constructive. This is a fundamental transition that is still in flux, and as it brings with it new technologies, needs, and realities, gas companies — and all companies — will have to adapt or die.

Leslie Palti-Guzman is co-founder and president of GasVista, a global gas consultancy focused on combining market fundamentals, policy risks, data analytics, and predictions. She is also the host and producer of the Energy Vista podcast.