Blog: Our LNG exports: Is there a Catch 3?

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We see that Ottawa has signalled there are two catches or hurdles in its consideration of exporting LNG to Europe via the Maritime provinces.

Now we’re wondering if there will be a third catch that would apply to all new LNG-for-export projects in Canada.

The first two hurdles:

  • Natural Resources Minister Jonathan Wilkinson says Canada would be looking for any new LNG facility to use a low-emission process for gas. But there are no federal standards yet set to enable anyone to know what to expect.
  • And Wilkinson says the feds would also expect that any new LNG plant in the east be capable of transitioning to exporting hydrogen later on. That may not be as simple as it sounds.

Now we hear that Ottawa is considering a third catch:

  • If an LNG project claims that its product will replace coal-burning for the generation of power in an overseas market, or replace oil as a marine fuel, the green backroom boys suggest it should have to “prove” to Ottawa’s satisfaction that the end-user customers will do just that. And “prove” how much it would cut greenhouse-gas emissions.

This isn’t a new idea, having been already embraced by a number of environmental groups.

For example, criticizing expansion of Fortis BC’s Tilbury LNG plant, the Wilderness Committee sniped at the approach taken by the BC Environmental Assessment Office.

The committee said: “The BCEAO . . . wants the proponent to provide a discussion of how the project ‘could’ impact global GHGs, how it ‘might’  displace emissions internationally and how it’s ‘likely’ to result in global emissions reductions. . . .

“For a credible review process, the BCEAO must request far more information from the proponent including but not limited to contracts that confirm the replacement of coal or bunker oil over the lifetime of the project; detailed plans from the companies providing the gas to accurately measure and eliminate methane emissions; (and) global market analysis for LNG over the lifetime of the project.”

In return, we note the following from Alberta’s Canadian Energy Centre (CEC):

“Canada leads among countries able to export natural gas to displace coal, with LNG that has a demonstrably cleaner environmental footprint. This was affirmed by regulators in Washington state in 2019 when the permit for the new Tacoma LNG project included the requirement for it to source natural gas from B.C. or Alberta.”

The CEC adds:

“Switching from coal to natural gas for electricity generation reduces emissions by half on average, according to the International Energy Agency. LNG from Canada can deliver an even bigger decrease, reducing emissions by up to 62 per cent, according to a June 2020 study published in the Journal for Cleaner Production. . . .

“According to Oxford Energy Institute, the global average emissions intensity for LNG is 0.35 per cent CO2 per tonne. Once operating after 2025, LNG Canada is expected to have emissions intensity of less than half that, at 0.15 per cent CO2 per tonne.

“The proposed Indigenous-led project Cedar LNG would have emissions intensity of 0.08 per cent. Woodfibre LNG, which recently received the go-ahead, would have emissions intensity of 0.03 per cent.”

But that’s not enough for green groups, who want Ottawa to require that LNG exporters somehow prove, in detail, how each and every sale to a buyer will reduce greenhouse-gas emissions in the buyer’s country and thus the world.

If Wilkinson or Environment Minister Steven Guilbeault come to embrace this roadblock it would throw a giant wrench into the works for future LNG projects.

First, none of our huge LNG competitors — the US, Qatar, Australia and Russia — would be bound by such a rule.

And while some of our key LNG customers such as China, Japan and South Korea have all spoken of using LNG to replace thermal coal, none has offered to guarantee in writing that it would be used for this; nor has any offered to quantify how much emissions would thus be avoided.

Let’s hope Catch 3 is an idea whose time has not come.

But, shortly after saying that, we learned that Canada is ready to sign on to draft international standards that, among other things, would require companies to account for the emissions from 15 different areas, including how its sold products are used and disposed of.”

Analyst Tammy Nemeth writes: ‘’So, even if a company uses carbon capture or offsets that make it net-zero, there is no place in the standards to report this in the numbers. Such an approach does not promote net-zero, it codifies absolute-zero.”

The draft standards mean a company must report on indirect emissions that can be linked to an entity across its entire value chain. In other words, to its own producer-emissions it must add emissions from any end users of its product(s), over which it has no control.

“Businesses large and small are suddenly required to have detailed knowledge of the emissions input-output tables of all other companies they have any interaction with, however distant.”

And this isn’t just about oil and gas companies. “The IFRS Standard includes industry-based disclosure requirements . . . covering 68 industries, from consumer goods to agricultural products, health care to consumer services. Every business aspect of society will be affected in the quest to report and ultimately lower gross emissions.”

Nemeth adds: ‘Any industry that produces or utilizes hydrocarbons will be seriously compromised, some to the point of extinction, which is why it is imperative that Canadian hydrocarbon companies and other affected industries submit feedback . . . before the comment cycle closes on July 29.”

 

A coal-fired power plant in China

(Posted here 16 June 2022)

(Updated with Nemeth info 22 June 2022)

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