Senior analyst Daniel Toleman said the main options for reducing LNG emissions include CCS, carbon offsets, methane leakage reduction, electrification, as well as renewables and batteries. However, CCS development could have a “material impact” on reducing LNG emissions, he said.
“The good news is that LNG players are well placed to lead the CCS charge, with strong balance sheets, operational capability and reservoir expertise,” Toleman said. “There are also economic incentives for pursuing CCS as reducing emissions mitigates against a carbon tax, helps future-proof the asset and can offer pricing upside.”
In the United States, a number of project sponsors including Venture Global LNG Ltd., Sempra, and NextDecade Corp. have unveiled plans for CCS developments to lower the emissions footprints of proposed LNG export facilities. Those proposals are for post-combustion CCS projects, which Toleman said tend to be more expensive than CCS at the reservoir since they require additional infrastructure and equipment.
There are also cost benefits to adding post-combustion CCS to a newbuild LNG facility, “due to design and location synergies,” he added. U.S. projects are also likely to benefit from the 45Q tax credit to make the developments “very competitive,” according to Wood Mackenzie.
LNG players in the U.S., who benefit from the 45Q tax credit, will likely be the first LNG players to take post-combustion CCS forward,” Toleman said.
On the reservoir CCS side, nations including Qatar, Australia, Malaysia and Timor Leste are expected to lead.
Still, Wood Mackenzie warned against a one-size-fits-all approach, as each LNG plant is subject to different factors impacting its emissions footprint.
“Each plant has a unique emissions profile and hence the best way to reduce the carbon footprint of an Arctic LNG plant may vary significantly from one in Qatar or Australia,” Toleman said.