Gas group sees lower-carbon LNG projects key for North America supply role

The lower-carbon natural gas liquefaction and LNG export projects being developed in the US and Canada will play an important part in a global energy market that increasingly looks for decarbonization methods while gas use is projected to grow, the International Gas Union said in a July 6 report.

The IGU referred to Venture Global's plans to capture and store up to 500,000 mt of CO2 annually at its Calcasieu Pass and Plaquemines liquefaction sites in Louisiana. The company also is planning to have carbon capture and storage facilities at its proposed CP2 project in Louisiana, which has yet to reach a final investment decision.

In Canada, the under-construction LNG Canada project led by Shell in Kitimat, British Columbia, with liquefaction capacity of 18 million mt/year, and the smaller-scale Cedar LNG and Woodfibre LNG projects, also in British Columbia, intend to be powered by hydropower to reduce emissions associated with the liquefaction facilities.

"Low-carbon LNG is expected to play a key role in the global energy system," as "LNG offtakers will be more cautious about the environmental and emissions performance of procured cargoes as the urgency to meet decarbonization targets intensifies," IGU said in the report.

LNG decarbonization

"Over the past year, we have seen an increased focus on decarbonization among liquefaction facilities," said IGU, which is based in Europe and advocates for increased gas use.

Another US LNG company planning to include CCS facilities, not mentioned in the IGU report section on lower-carbon projects, is NextDecade's Rio Grande project that is looking to store up to 5 million mt/year of CO2 at the 27-MPTA project planned near Brownsville, Texas.

Other decarbonization measures at LNG export facilities include all-electric motors to support the liquefaction compressors, which can utilize renewable resources based on the power supplies of the local utility, and gas supplies that have a reduced carbon footprint due to upstream or pipeline transportation measures, IGU said. The Hammerfest LNG project in Norway and Freeport LNG project in Texas are two projects featuring electric motors, IGU pointed out, asserting that gas use in combination with renewable resources "will be the two major pillars of decarbonization."

The 2022 World LNG report from the 150-member IGU highlights the growth in LNG in 2021 and include some developments from the first half of this year, such as soaring commodity prices and the effects of Russia's invasion of Ukraine. Spot LNG prices reached historic levels and European benchmarks exceeded Asian prices, the report noted.

With gas demand climbing as the economic recovery from the pandemic outstrips gas supplies globally, IGU said "addressing supply constraints is going to be critical to energy security and economic stability in the world."

Market upheaval

For the future, "the market upheaval caused by the Russia-Ukraine conflict is likely to stimulate investments into additional liquefaction facilities as investors put more emphasis on increasing energy security while at the same time, balance decarbonization goals in this fast-changing landscape," according to the report.

As of April, about 12.5 million mt/year of liquefaction capacity started service in 2022, bringing global liquefaction capacity to 472.4 million mt/year. Almost 7 million mt/year was added in 2021, with the global utilization rate climbing from 75% in 2020 to 80% in 2021 and many facilities operating at full capacity in early 2022, the IGU said. Seven out of 21 LNG exporting countries achieved utilization rates above 90% in 2021, with the US a beneficiary of strong global demand and a utilization rate around 100%.

The IGU said outages have affected utilization rates over the past year or so, without accounting for the Freeport LNG outage following a fire at that facility in June. The Hammerfest project in Norway was down throughout 2021 and into May of this year after a fire at one of the power turbines in the fall of 2020, and the Prelude floating LNG project in Australia was shut down for five months after a fire in December 2021, the report said.

Australia, US, Qatar

The US accounted for almost half of the gains in LNG exports, with Australia, the US and Qatar the largest LNG exporting countries, while China overtook Japan as the largest LNG importer, the report said.

As of April, about 136 million mt/year of liquefaction capacity was under construction or approved for development globally, with 7.7 million mt/year of that capacity expected to start service in the second half of 2022 and the remainder starting between 2023 and 2027.

The global LNG trade connects 19 exporting markets with 40 markets with importing capabilities, with a growth of 4.5% in trade activities during 2021, the IGU said.

The LNG fleet added 57 ships in 2021 and seven in the first four months of 2022, with a total of 641 active ships, with 45 floating storage and regasification units and five floating storage units, which together represent a 10% gain from 2020 to 2021, the IGU said.