Carbon-Offset LNG: Africa’s Transitional Fuel

Consider these factoids:

• As published by the American Petroleum Institute, with data derived from the International Energy Agency (IEA), in 2040 oil and natural gas will still provide half the world’s energy needs, even if every country satisfies its emissions reduction commitments.
• The IEA also projects that by 2050, even as renewables will have nearly tripled their share of global energy to 29% and as coal use will have nearly halved to 15%, natural gas will still supply 20%, nearly the same proportion it provides today.
• According to data from the U.S. Department of Energy, 75% of United States energy will come from fossil fuels in 2050, which is widely inconsistent with Intergovernmental Panel on Climate Change reduction goals.
• Getting the world on track for the Paris Agreement target of net-zero emissions by 2050 would require a tripling of spending from current levels to around $4 trillion annually, according to the IEA, and global economies are confronted with the threat of a potentially prolonged recession.

A “transition” from fossil fuels may come someday; however, data show the rise in renewable energy is not keeping pace with the rise in global energy demand. There are emerging inconvenient truths about the timing of the energy transition with experts at McKinsey modeling resilient gas demand through 2050 and not peaking until 2037. Furthermore, a dose of realism is required when accessing the continued contribution from electric vehicles when considering carbon intensity of their construction and vulnerable China-dominated supply chains for the requisite rare earth elements for building batteries. In short, the prospects are poor for a timely transition and eco-energy planners are seeking realistic solutions for curbing climate change that would hedge “betting the planet” on renewables.

On a positive note, a recent innovation to accelerate the decarbonization of natural gas power generation promises to be a game-changer. NET Power has a proven technology combining the combustion of natural gas with pure oxygen that captures the CO2, which can then be utilized or sequestered, transforming natural gas into clean baseload power with a carbon intensity similar to solar power and wind energy. The estimated cost of electricity would be 1.9 cents per kilowatt hour compared to 4.2 cents for a traditional combined cycle natural gas plant, making this the cheapest source of electricity, and without carbon emissions. Consider the climate impact of replacing retiring power plants and meeting new demand for electrification with zero-emissions power plants. This would equate to approximately 17,000 NET Power plants globally with over 1,300 plants in the U.S. alone.

Liquid Natural Gas (LNG) is being considered as an interim rescue fuel since the combustion of natural gas emits about half as much CO2 as coal and 30% less than petroleum as well as far fewer pollutants per energy unit delivered. The reality of global shortages of energy may change priorities from the long-term threat of climate change mitigation to the near-term acute pain of humans freezing and their livelihoods crippled from imploding economies. For the orthodox environmental community, it’s becoming a “Hobson’s Choice” for cleaner fossil fuels like natural gas over more polluting coal and petroleum.

LNG is methane cooled to minus 260 degrees Fahrenheit to render it liquid in giant liquefaction plants costing billions each. Consider its growth: According to the International Gas Union’s 2022 World LNG Report, “About 6.9 million tonnes per annum (MTPA) of liquefaction capacity was brought online in 2021… In the first four months of 2022, an additional 12.5 MTPA of liquefaction capacity was brought online, bringing the total global liquefaction capacity to 472.4 MTPA as of April 2022.

LNG is booming with its share in the global gas supply projected to increase from today’s 13% to 23% by 2050. The US leads in LNG investments followed by Canada, Russia, and Australia. Europe’s thirst for oil and gas to replace sanctioned Russian supply is reviving interest in African energy projects that were previously shunned due to costs and climate change concerns.

The IEA projects a peak of natural gas produced from Africa at 300 billion cubic meters in 2024 and oil output peaking at 6 million barrels per day in 2022 – down from 10 million in 2010 indicating a longer life span for gas projects than oil. There are now projects worth about $100 billion on the continent and Africa could replace as much as a fifth of Russian gas exports to Europe by 2030.

For Europeans who have profited from cheap energy imports in the past, emergency energy security considerations are now trumping short-term climate commitments. Europe is building new LNG import terminals, drilling for gas in the North Sea, and subsidizing energy despite decarbonization pledges.

LNG is fast becoming the fuel of choice for countries committed to moving away from coal and petroleum by adopting this perspective transition fuel gunning a seismic shift towards a low-carbon future replete with renewable energy.

With almost 60% of recently discovered reserves by volume, West Africa is by far the largest contributor to the continent’s hydrocarbon future. The region’s top three newly discovered reserves – Senegal, Mauritania, and Ivory Coast – boast over 50 trillion cubic feet of gas already discovered in the region.

On the Eastern side of the African continent, Tanzania recently signed an LNG agreement with Equinor and Shell that accelerates development of a $30 billion LNG export terminal and Mozambique intends to restart a $20 billion LNG project that was halted due to militancy unrest. A whopping $120 billion in LNG projects is projected to achieve Final Investment Decision by 2026 in Mozambique alone.

There is an emerging debate about economic justice and the right of all Africans to have access to affordable and secure energy creating employment and that the world must support a “just” energy transition for all. In 2018, about 600 million people in Sub-Saharan Africa did not have access to electricity and nearly 900 million people lacked access to clean cooking fuels and technologies.

Going Green with Carbon-Neutral LNG

As the world increasingly embraces clean energy, oil and gas producers and users are ramping up their efforts to reduce their carbon impact. Carbon-neutral LNG has emerged as an innovative way to sell natural gas while mitigating its environmental impact.

Carbon-neutral LNG has attracted a lot of interest from producers and users who face the challenge of addressing environmental concerns while maintaining shareholder returns. The natural gas market faces environmental scrutiny from investors and regulators, as well as from lenders who provide access to capital. Producers are starting to label LNG cargoes as carbon neutral in an attempt to allay such concerns.

Carbon-neutral LNG involves offsetting the carbon emissions from the LNG supply chain through the purchase of carbon offsets. Carbon neutrality can only be achieved by offsetting the entire product lifecycle emissions, or all the emissions associated with the production, transportation, and use of LNG. This would allow producers to sell a differentiated and premium product that is attractive to buyers seeking an environmentally friendly LNG cargo.

The first carbon-neutral LNG cargo was traded in 2019 when Tokyo Gas and GS Energy bought a carbon-neutral LNG cargo from Shell. On average, the product lifecycle emissions of a conventional LNG cargo (175,000 cubic meters transported on standard vessel) are generally estimated at around 250,000 tons of CO2 equivalent. This amount can vary depending on various factors such as the source of the LNG, the type of liquefaction technology, the vessel used to transport the LNG, and the equipment and procedures in place at the re-gasification terminal.

Coincidentally, hydrocarbon-endowed African countries are also prime candidates for sustainable reforestation projects that could provide the production of regenerative carbon sequestration biomass eligible for carbon credits to offset the LNG CO2 emission footprint for achieving carbon-neutral status.

Carbon-neutral LNG does not mean that the LNG cargo does not generate emissions but rather the carbon footprint across the entire LNG value chain, from extraction of natural gas, liquefaction, shipping, and re-gasification to final consumption is measured, verified, and offset using legitimate carbon credits. Therefore, carbon-neutral LNG should be named “Carbon-Offset LNG” as this a more accurate and appropriate term.

Also, Carbon-Offset LNG should be structured to only apply to CO2 emissions produced from the wellhead to customer delivery which, according to the above DOE data, produces the minority of the emissions. This would transfer the major carbon offset responsibility from the LNG producer to the customers encouraging reduction measures and allowing them to choose the most appropriate offset for their application. 2021 saw an 80% increase in Carbon Capture, Utilization and Storage (CCUS) projects associated with gas production and there was progress in plans to use renewables to power LNG liquefaction and regasification terminals.

For LNG producers, nature-based solutions could provide quality offsets whereby they would receive the carbon credits for funding projects developed on African marginal lands for the purposes of reforestation, production of lumber, and sequestration of atmospheric carbon dioxide. Also, a percentage of the profits from the sale of lumber would go towards improvement of the local African community providing the marginal land. This structure would create more valuable quality carbon credits as the funding criteria would meet the United Nation’s Sustainable Development Goals (SDGs) for helping to transform Africa’s industrialization with a less polluting transition fuel.

Timber & Carbon Farming for Africa

Of the 10 countries in the world with the largest annual net loss of forested area, six are in Africa which loses an average of 40,000 square kilometers of its forests annually. While deforestation in other parts of the world is mainly caused by commercial logging or cattle ranching, the leading causes in Africa are associated with human activity and the statistics are striking: an estimated 90 percent of the entire continent’s population uses fuel wood for cooking. This causes substantial health issues (mainly respiratory) and is the equivalent of 20 million barrels of oil a day.

An estimated 20 to 25% of annual deforestation is thought to be due to commercial logging. The remaining 15 to 20% is attributed to other activities such as cattle ranching, cash crop plantations, and the construction of dams, roads, and mines.

According to the UN Food and Agriculture Organization (FAO), indigenous (also known as “old-growth”) forests in Africa are being cut down at a rate of nearly 10 million acres per year about twice the world’s deforestation average. These losses totaled more than 10% of the continent’s total forest cover between 1980 and 1995 alone. There are millions of acres of deforested lands in Africa that could be developed as Timber & Carbon Farms for producing valuable commercial timber while also curbing climate change by sequestering CO2.

There is also an afforestation opportunity for Timber & Carbon Farming supporting the epic Great Green Wall which proposes an 8,000-kilometer wall of trees across the entire width of Africa. Led by the African Union, this initiative was conceived to combat desertification and hold back expansion of the Sahara by planting a wall of trees stretching across the entire Sahel. The modern green wall has since evolved into a program promoting water harvesting techniques, greenery protection, and improving indigenous land use techniques, aimed at creating a mosaic of green and productive landscapes across North Africa.

This project is a response to the combined effect of natural resource degradation and drought in rural areas. It seeks to help communities mitigate and adapt to climate change as well as improve food security. The population of the Sahel is expected to double to 160 million people in the next two decades, emphasizing the importance of maintaining food production and environmental protection in the area.

In conclusion, it is clear that carbon markets and offsetting are not a substitute for reducing emissions, but can help unlock private and public sector capital for making a contribution towards the decarbonization of our planet. Offsetting should be considered as a near-term way to address emissions while the technologies to avoid and reduce emissions are developed at scale across value chains. High-quality projects can deliver additional benefits, such as helping to fund the scaling up of pre-commercial climate-curbing technologies while also supporting local communities and biodiversity.

Copyright © 2023 Philip C. Cruver

About the Author: Phil Cruver is Founder and CEO of Regenbiomass, which develops regenerative biomass for producing renewable biofuels, sustainably branded pulp, and other nature-based solution for decarbonization. Phil founded several other companies including KZO Sea Farms, Catalina Sea Ranch, and International Dynergy.

RegenBiomass
Palm Desert, CA 92211 • Contact: Phil@Regenbiomass.Com