Is Carbon Neutral Oil Really Possible?

Some of the world’s biggest oil and gas firms have started to sell what they say is carbon-neutral oil and liquefied natural gas (LNG) as buyers increasingly look at the environmental credentials of global energy supply.

Several major oil firms have announced sales of carbon-neutral LNG cargoes in the past few years. The trend is only set to become stronger amid the global push toward net-zero emissions.

But ‘carbon neutral’, especially for LNG cargoes, is not what it looks like at first glance.

One would think that the term carbon neutral implies that the emissions generated from the production, liquefaction, and transportation of the gas have been offset during those processes with technologies such as carbon capture, for example.

In reality, this “carbon-neutral” status is being achieved by LNG buyers and sellers paying for participation in emissions-reduction projects elsewhere (actually anywhere) in the world.

Oil and gas firms buy verified carbon credits, mostly for nature-based solutions, to prevent deforestation somewhere. This approach doesn’t actually reduce the carbon emissions from an LNG cargo; it just aims to offset those emissions with the prevention of potential emissions if the emission-reduction project they are invested in wasn’t implemented.

Analysts and representatives of providers of emission-reduction projects say that these carbon-offsetting approaches do not advance net-zero goals and are difficult to calculate, Bloomberg reports in an investigative article.

Big Oil Selling Carbon Neutral LNG

In June 2019, Shell said that it would deliver carbon-neutral LNG cargoes to GS Energy and Tokyo Gas. Shell has used carbon credits to compensate for the CO2 emissions generated by each cargo, from gas production to the final consumer. Shell says that “the terms ‘carbon neutral’, ‘carbon off-set’ or ‘carbon off-set compensation’ indicate that Shell has engaged in a transaction to ensure that an amount of carbon dioxide equivalent to that associated with the production, delivery and usage of the fuel has been removed from the atmosphere through a nature-based process or emissions saved through avoided deforestation.”

The nature-based projects for this particular deal included the Katingan Peatland Restoration and Conservation Project in Indonesia and the Cordillera Azul National Park Project in Peru.

Last year, TotalEnergies said it had delivered its first shipment of carbon-neutral LNG to the China National Offshore Oil Corporation (CNOOC). The carbon footprint of the LNG shipment was offset with VCS (Verified Carbon Standards) emissions certificates financing two projects: the Hebei Guyuan Wind Power Project, which aims to reduce emissions from coal-based power generation in northern China, and the Kariba REDD+ Forest Protection Project, which aims to protect Zimbabwe’s forests.

Carbon-Offsetting Projects

While Total is undoubtedly helping Zimbabwe’s forests with participation in the forest protection project, analysts and experts question the idea of the oil and gas industry use of the term ‘carbon neutral’, considering that it’s not emissions from LNG that are being reduced.

Saving forests from deforestation does not equal removing the carbon footprint of an LNG cargo, experts tell Bloomberg.

This ‘carbon neutral’ approach to offsetting emissions “is encouraging a fictitious engine that doesn’t help advance our net-zero goals,” Danny Cullenward, a Stanford University lecturer and policy director at non-profit group CarbonPlan, told Bloomberg.

TotalEnergies acknowledges that carbon-offsetting projects are not equal to removing direct LNG emissions.

“While an important tool,” TotalEnergies said in a statement to Bloomberg, “offsetting cannot be considered as a substitute for direct emissions reductions by corporates, but as a complement.”

The Calculation Problem With Emission Offsets

There are several issues with nature-based projects to offset emissions. First, there isn’t a universal methodology and regulation about calculating the Scope 1, 2, and 3 emissions of an LNG cargo. Then, there isn’t a universal methodology to calculate if the avoidance of deforestation in an African country would have saved as much emissions as an LNG cargo generates during its entire value chain, from natural gas production to end use.

Critics, of course, slam the energy firms marketing their oil or LNG as ‘carbon neutral’, accusing them of greenwashing and not helping a net-zero world at all.

As carbon-neutral LNG trade is set to grow, the industry needs to address questions such as “which emissions are accounted for, what methodology is employed in the emissions measurement and verification, and how the emissions are priced—either through a carbon credit or a carbon tax,” Erin M. Blanton and Samer Mosis wrote in a commentary for the Center on Global Energy Policy at Columbia University SIPA last month.

“Industry standards around what emissions, emissions ratios, and accounting methodologies are being used to determine the overall GHG load of LNG is a necessary component in the development of a verifiable and trusted carbon-neutral LNG market,” they said.   

“Most importantly, if done transparently and uniformly, it will help alleviate fears of greenwashing—that cargoes are being marketed as environmentally friendly when they are not, either due to poor carbon credit quality or erroneous GHG measurement and accounting,” the experts wrote.  

By Tsvetana Paraskova for Oilprice.com 

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