LNG customers hold power over producers in rush to quantify GHG: Chevron

Highlights

Carbon tags for cargoes gain traction

Cheniere, NextDecade, EQT pursue initiatives

Author Harry Weber 28 Apr 2021 spglobal.com/platts

Houston — Chevron expects global LNG customers to continue pushing producers to tie commercial deals to greenhouse gas emissions control efforts, following a unique offtake agreement it signed with Singapore's Pavilion Energy earlier this year, a company official said April 28 during the FP Virtual Climate Summit.

The carbon intensity initiative, though smaller in scale, is similar to what Cheniere Energy has said it will begin doing next year for each shipment from its two US liquefaction terminals.

Gas and LNG producers, especially in North America where new projects face challenges getting off the ground, are increasingly looking for ways to show their commitment to reducing GHG emissions, or at least quantify those emissions, amid the global energy transition to cleaner burning fuels.

"If you think about the green premium that's talked about, we think the power resides within the consumer," Michael Rubio, Chevron's general manager of ESG and Sustainability, said during a panel discussion at the summit. "The market will respond well."

Using a food analogy, he added, "Everybody needs to know they are on the diet, if you will. Everybody's not eating healthy right now."

In February, Pavilion signed a six-year LNG sale and purchase agreement with Chevron for the supply of approximately 500,000 mt/year of LNG to Singapore starting in 2023. As part of the deal, each LNG cargo delivered under the agreement will be accompanied by a statement of its GHG emissions measured from wellhead to discharge port.

"Now every LNG cargo that comes in will have a carbon statement along with it so they will be able to track the carbon intensity throughout the entire value chain," Rubio said.

At the time of the initial announcement, Pavilion said it and its partners were committed to codevelop and implement a GHG quantification and reporting methodology for LNG.

San Ramon, California-based Chevron is a strategic LNG producer, though it has been scaling back its global natural gas portfolio in recent years to cut costs and recalibrate its long-term energy investments.

Chevron operates the Gorgon and Wheatstone LNG facilities in Western Australia. Last year, it said it would sell its 16.67% stake in the Woodside -operated Australian North West Shelf project. In March, it ceased funding further feasibility work for the proposed Kitimat LNG project in British Columbia, after saying in late 2019 it would divest its 50% stake in that project.

Cheniere cargoes

As the biggest US LNG exporter, Cheniere is a major buyer of physical gas that it uses in the liquefaction process. Much of the gas is drilled in shale basins stretching from the US Gulf Coast to the Northeast to Western Canada.

Starting in 2022, it plans to provide customers with cargo emissions tags associated with each LNG cargo produced at its Sabine Pass terminal in Louisiana and Corpus Christi liquefaction terminal in Texas. The tags are designed to quantify the estimated GHG emissions of LNG cargoes along the LNG value chain, from the wellhead to the cargo delivery point, Cheniere said in February, two days after the Chevron-Pavilion announcement.

Elsewhere, NextDecade is pursuing an aggressive carbon capture and storage project tied to its yet-to-be sanctioned Rio Grande LNG terminal in Brownsville, Texas. It also is partnering with Project Canary to have the GHG intensity of the LNG to be produced at Rio Grande LNG assessed. Upstream US gas producers EQT and Chesapeake Energy have similar arrangements with Project Canary.