Australia’s liquefied natural gas producers will have to beat cost and technical challenges and be at the forefront of the “green LNG” trend to remain competitive as importers race to reach net zero emissions, says consultancy Wood Mackenzie.
The firm estimates about 75 per cent of LNG demand comes from countries that have pledges to reach carbon neutrality, including Australia’s three largest LNG customers, China, Japan and South Korea.
With new and lower-cost LNG supply coming online over the next decade from Qatar and Russia, Australian producers needed to do more to avoid losing market share, with carbon-neutral LNG a key strategic option, Wood Mackenzie senior analyst Daniel Toleman said.
Total’s first carbon-neutral cargo of LNG was delivered from Australia to China in October 2020. Total
Shell has shipped about five cargoes of carbon-neutral LNG from Australia, while France’s Total has shipped at least one, from its partly owned Ichthys LNG project in Darwin. Santos also has a pact with Mitsubishi to study carbon-neutral LNG shipments from Darwin LNG using gas from the Barossa field where Mitsubishi is a long-term customer.
International LNG importers group GIIGNL estimates the cost premium for a carbon-neutral LNG cargo at about $US2.5 million ($3.3 million), assuming reforestation offsets at $US10 a tonne of CO₂ and total emissions of a conventional LNG cargo of about 250,000 tonnes.