Canada Has Head Start In Future Low Carbon LNG Market, But Scope 3 Emissions Challenges Ahead: GPAC Panelists
Canada’s LNG operators are positioning themselves to be preferred suppliers of low-emissions, socially responsible LNG to global markets, but right now those premium markets for green LNG don’t exist, industry leaders told the Gas Processing Association of Canada (GPAC) breakfast forum in Calgary.
Industry is also working to lessen and then end its upstream Scope 1 and Scope 2 emissions as governments legislate reduction targets. But Scope 3 emissions will have to be dealt with to reach longer-term net zero targets.
“The global market is still very much about prices, but we’re also aware the market is moving,” said Heather Christie-Burns, Pembina Pipeline Corporation’s VP for its Transmission Business Unit. “We are ahead of what the market will become, and we are establishing our position.”
Pembina is working with the Haisla Nation on the Cedar LNG project, a floating liquefaction facility that will require around 400 mmcf/d of gas once operational. While still in the approval process, the Haisla-led project will be tied to BC’s hydro-powered electrical grid, making it among the lowest emitting LNG export facilities in the world.
“We understand well the need to be price competitive and there is no green premium. But like Wayne Gretzky said, ‘you have to go where the puck is headed, not where it is,’” Christie-Burns said.
The push for lowering LNG emissions is coming from governments in Canada, not consumers of the product, said Teresa Waddington, VP corporate relations for LNG Canada. The Clean BC Act has set a target of lowering overall provincial emissions by 40 per cent by 2030 and reaching net zero emissions by 2050. The gas industry is expected to lower emissions 33-38 per cent below 2007 levels by 2030. Methane emissions are being targeted for a 75 per cent reduction. The federal government also announced it is setting emissions reduction targets for the oil and gas sector this year, with a similar 2050 target.
“People aren’t willing to pay for green molecules. Right now, it’s not going to be driven by the consumer,” said Waddington. But there is starting to be some pull from overseas markets, so it makes sense to reduce or eliminate Scope 1 and Scope 2 emissions from upstream LNG production. “Customers are looking for ways to create net zero cargos. We can offer a path to the net zero concept by not adding a bunch of carbon at the start.”
Canada has some inherent advantages in producing lower emission LNG, said Christie-Burns. Having a winter climate means natural gas is entering liquefaction facilities at average temperatures of 7 C compared to 22 on the U.S. Gulf Coast, meaning less energy is needed to cool it down.
Shorter distances to Asian markets also limit the amount of fuel needed for shipping. The Cedar LNG project is forecasting emissions intensity of just 0.08 per cent of carbon dioxide (CO2) per tonne of LNG produced, less than one-third the global industry average of 0.35 per cent per tonne.
LNG Canada expects emissions intensity from Phase 1 of its massive project to be 0.15 per cent of CO2 per tonne produced, less than half the global industry average, and 35 per cent below its competitors. “That’s pretty amazing. We are one step ahead globally. If we can be competitive on prices, we will be first in line,” said Waddington.
Getting to net zero upstream is important, but energy systems should be measured across their entire life cycle, said Kelly Howlett, TC Energy Corporation’s commercial director for the Coastal GasLink project.
TC Energy continues modernizing its assets and is investing in technologies to eliminate its emissions. But that is only one part of the story. “We need to be thinking on a much bigger scale. This goes well beyond company and country. We need to help achieve global reductions.”
LNG Canada research shows its gas exports to China will emit approximately 35-55 per cent fewer greenhouse gas (GHG) emissions than China’s prevailing energy source — coal. The largest GHG reductions realized in China from Canadian LNG will come from displacing coal in residential heating (56 per cent), followed by electricity generation (52 per cent), and industrial heat generation (36 per cent).
“We need to make a more direct link — that these molecules of gas are shutting down coal plants in China,” said Howlett.
Ultimately, Canada’s LNG sector will have to account for its Scope 3 emissions from the use of its product as well — just like the coal industry — as the world moves towards net zero, or carbon neutral, energy systems, said LNG Canada’s Waddington. “We need to get to the point of having global carbon markets covering the entire footprint of all molecules that produce energy.”
“Dealing with Scope 3 emissions depends on what tools you have at your disposal,” she added. “One partner we have want to create hydrogen with CCUS. There are technical abatement options. What other tools — policy options or nature-based solutions — are there that we know will work? There are a lot of questions. We don’t have all the solutions right now.”
The U.S. Inflation Reduction Act (IRA) could provide these types of solutions, leaving Canada less competitive, said Pembina’s Christie-Burns. “The IRA is a groundbreaking act. It will move investment and it will move projects. The U.S. developed a far more effective model than Canada. It’s carrot versus stick and it’s a carrot model. In Canada right now we’re functioning with a stick model with levies and fees if you don’t act a certain way.”
Howlett is more optimistic about the impact of the IRA on Canada. She hopes Canadian governments will see what’s happening in the U.S. and take comfort or optimism that both countries are on the same path. “It could affect positive change in Canada.”
But governments need to facilitate investment in LNG development in Canada, or it will happen elsewhere, she added.
“One of the biggest opportunities is to really have regulatory certainty. At the end of the day if we can’t get projects done, investment will go where they can get done even if they are in less reliable or responsible countries.”