LNG Seeks a Future Under Mounting Climate Pressure

Bloomberg News

Police vans cordoned off Berlin’s Adlon Kempinski hotel Tuesday as environmental protesters attempted to disrupt an energy conference, splashing green paint against the side entrance of the luxury venue by the Brandenburg Gate.

Inside, the global liquefied natural gas industry gathered to debate its future. Having largely turned the page on energy price shocks, the focus is shifting to lowering carbon dioxide and methane emissions in the sector. The entire supply chain — from production to shipping to consumption — is under scrutiny.

The rush to find solutions is particularly evident in Europe and its largest economy, Germany.

The pressure to decarbonize or, in the words of Shell Plc’s Senior Vice President Tom Summers, to “de-fossilize,” is so big that European LNG buyers are no longer rushing to enter new projects, said BP Plc’s vice president for global LNG trading and origination, Jerome Milongo.

The fuel is still expected to play an important role for at least the next couple of decades, with more supply coming from the US and Qatar. That’s partly because global energy consumption is about to undergo a massive shift thanks to electrification, which will require other fuels to provide backup for intermittent renewables.

The share of electricity in the energy mix will rise from 20% to potentially half in the next two decades, driven by wind and solar, according to Steve Hill, executive vice president for gas and LNG at Mercuria Energy Group Ltd. The other half will continue to come from other sources, including natural gas, he said.

One issue is lack of transparency. Just like comparing the sugar or fat content of supermarket items, consumers want to know the carbon intensity of the energy products they buy, said Javier Moret, global head of LNG at German utility RWE AG.

In addition, there is “a very low willingness to pay” for the low-methane production that Europe is pushing for, said Egbert Laege, chief executive officer of Germany company Securing Energy for Europe GmbH.

For many emerging markets in Africa and Asia, the cost to decarbonize is even less attainable.

But if LNG is here to stay, calls to lower the industry’s emissions footprint are unlikely to subside anytime soon. That means the pressure’s on to adapt and reinvent, Shell’s Summers said.

–Anna Shiryaevskaya, Bloomberg News