Global gas industry trends

Since the beginning of this year, the world has completed multi-ship carbon neutral LNG transactions, such as Gazprom to deliver the first ship of carbon neutral LNG to Europe, Japan has purchased carbon neutral LNG for many times, Singapore and India and other countries have reached carbon neutral LNG transactions. Natural Gas Intelligence, a provider of gas market information and data, expects carbon-neutral LNG deliveries to account for less than 1% of total global LNG deliveries this year, but this will not prevent the continued penetration of carbon-neutral LNG in the market. Wood Mackenzie believes that the green process of LNG has only just begun, and the industry's understanding of carbon emissions will gradually deepen. As demand increases in the future, the LNG market may face higher emission reduction requirements, and areas such as government legislation, shareholder obligations and project financing may require LNG producers, deliverers and consumers to further reduce carbon emissions.

In the future, with the advancement of carbon neutrality process, carbon neutral LNG trading will become the trend of The Times. Carbon neutral LNG responds to higher carbon emission reduction requirements, but at the same time, carbon neutral LNG has a higher cost than traditional LNG, and the corresponding premium will be distributed to all links of the industrial chain, and buyers and sellers will face many problems such as cost sharing, certification standards, carbon metering, and carbon trading.

(3) Reducing methane emissions into an industry development consensus

Reducing methane emissions is an important part of global greenhouse gas emission reduction and an effective way to slow down the rate of climate warming in the short term. Natural gas produces methane emissions at different stages of the production and operation process. Whether natural gas can really play a supporting role in the energy transition depends, to a certain extent, on the effectiveness of methane emission reduction in the natural gas industry. At present, the issue of methane emissions has attracted global attention, and the methane emission reduction of the natural gas industry is expected to further accelerate.

Whether natural gas can really play a supporting role in the energy transition depends, to a certain extent, on the effectiveness of methane emission reduction in the natural gas industry. Among the greenhouse gases produced by human activities, methane is the second largest greenhouse gas after carbon dioxide, and its global warming potential (GWP) within 20 years and 100 years after emissions is 84 times and 28 times of carbon dioxide, respectively. Reducing methane emissions is an important part of global greenhouse gas emission reduction, and it is also the most direct and effective way to slow down the rate of climate warming in the short term. Studies have shown that rapid, across-the-board reductions in methane emissions from oil and gas, agriculture, and other activities could slow the rate of global warming by 30 percent.

In the oil and gas sector, methane emissions are large, especially in the whole process of natural gas production and operation, from upstream natural gas collection and processing, to midstream natural gas storage and transportation, and then to downstream urban gas and end users, each link will produce methane emissions. In 2020, the global oil and gas industry will emit 72 million tonnes of methane, equivalent to 6 billion tonnes of carbon dioxide equivalent at a 20-year global warming potential. According to the IEA, from a technical feasibility point of view, global methane emissions from the oil and gas sector could be reduced by 75% by 2030. Since the recovery value of methane offsets the cost of preventing leakage, about 50% of methane emissions can be reduced at zero cost. Even if harvesting methane does not pay off, doing nothing could raise public doubts about whether natural gas is really clean, leading some countries in Europe and the United States to introduce policies that restrict its use. Therefore, eliminating the negative impact of methane leakage on natural gas has become one of the main drivers for many oil and gas companies to commit to methane emission reduction.

Exxonmobil, for example, has proposed internal rules to strengthen methane regulation, and in its Energy and Carbon Emissions Summary released in December 2020, it set a goal of reducing methane emission intensity by 40% to 50% by 2025. Total is committed to eliminating all associated gas flaring at its operating facilities by 2030. Chevron plans to reduce methane intensity by 50 percent from 2016 levels by 2028 and achieve no Routine Gas Flaring by 2030. The 2035 carbon Management plan developed by the Russian state oil company proposes that by 2035, the methane emission intensity is less than 0.25%, and the associated gas is zero combustion. In its transformation strategy for 2021-2025, Petrobras plans to reduce upstream methane emissions by 40 percent by 2025.

On September 20, 2021, the chairmen/ceos of member companies of the Oil and Gas Industry Climate Initiative (OGCI) jointly signed the OGCI's updated development Strategy and updated the 2025 upstream carbon intensity and methane intensity targets. As one of the important organizations in the international oil and gas industry to address climate change, OGCI currently has 12 member companies, including petrochina, ExxonMobil, BP, Shell, Saudi Aramco, etc., whose oil and gas production accounts for 30% of global oil and gas production. Under the new targets, the OGCI said it plans to reduce upstream methane emission intensity to well below 0.2 percent by 2025, reduce the carbon intensity of upstream operations to 17 kilograms of carbon dioxide equivalent per barrel of oil equivalent, and end conventional burning by 2030. The "Global Methane Reduction Commitment" launched at the 26th Meeting of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP26), which just concluded in November, also proposes to reduce global methane emissions by at least 30% by 2030 compared to 2020 levels. With more and more international attention on methane emission reduction, the gas industry is expected to further accelerate methane emission reduction.