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LNG growth to propel oil and gas industry's carbon emissions

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Reuters reports LNG will be the biggest source of carbon emission growth for the world’s top oil and gas companies by 2025, according to a new study by Wood Mackenzie, as demand for the super-chilled fuel is set to rise sharply.

Oil and gas companies such as Exxon Mobil, Royal Dutch Shell and Total have promoted natural gas as a cleaner fossil fuel that will displace coal to meet growing demand for energy as the world shifts away from fossil fuels in the coming decades.

But converting natural gas into LNG by cooling it to minus 160°C in order to transport it to demand centres is a highly energy-intensive and therefore emission-intensive process, according to WoodMac analyst Amy Bowe.

Capping emissions of heat-trapping gases by the oil and gas industry has moved to the forefront of investors’ agendas in the wake of the 2015 Paris climate agreement to limit global warming to below 2°C by the end of the century.

Companies are coming under growing pressure to tackle emissions from flaring excess gas at oil fields as well as limiting the emissions of methane, a highly potent greenhouse gas, from pipelines and LNG terminals.

The Edinburgh oil and gas industry consultancy said in a study that emissions from oil and gas production operations of 25 of the world’s top energy companies are nevertheless expected to rise by 17% by 2025.

Fossil fuel output will increase by 15% over the same period. Emissions resulting from LNG production are forecast to grow by 43% over the period compared with a 22% increase in supply, “representing the largest absolute increase in emissions,” according to the report.

Around 10% of gas processed by an LNG terminal is lost into the atmosphere, Bowe said in an interview.

“If you look at the emissions produced just through the extraction and production of it, LNG is more emissions-intensive than pipeline gas and that is largely due to the liquefaction process,” Bowe explained.

Global demand for LNG could increase from around 240 million tpy to around 430 million t by 2025 according to Shell.

However, despite its large contribution to carbon emissions, LNG remains the least polluting fossil fuel when taking into account the full chain of production, delivery and consumption, primarily for producing electricity, Bowe said.

"If we were to look full-cycle at the emissions produced through the consumption of fuels, we would expect LNG to still be more favourable.”

“Compared to coal, LNG is still much more favourable on a full-cycle basis.”

The growth in emissions is also driven by a wave of investments in heavy oil projects such as Canada’s oil sands, according to the study.

WoodMac also estimated that around US$45 billion of oil and gas projects representing some 2.3% of fossil fuel reserves of firms surveyed are at risk of not getting the green light by 2025 because of their high carbon emissions.

The number, based on a tax of US$40 per t of carbon, represents a fraction of other estimates of so-called ‘stranded’ fossil fuel assets.

Conventional onshore oil and gas fields will remain the largest single source of production and emissions by 2025, although their share of the total will diminish as fields age, according to the study.

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