LNG Carrier Shipbuilding Risks Stranded Assets Due to Climate Policies

Risk for stranded assets is high due to the rate of LNG carrier construction and climate change policies (file photo)

PUBLISHED MAY 25, 2023 4:46 PM BY THE MARITIME EXECUTIVE

 

The rapid growth in LNG shipbuilding responding to the demand for gas transport is raising the likelihood of creating stranded assets writes Climate Analytics, a climate science and policy institute, in a newly released report entitled “High and Dry: The global energy transition's looming impact on the LNG and oil shipbuilding industry.” Partnering with South Korean climate and energy advocacy group Solutions for Our Climate, the report highlights the risk of overshooting LNG shipping capacity which is increased by future energy scenarios that call for the rapid elimination of fossil fuels.

“This report finds that the uptake in shipping capacity far exceeds global forecasts for the LNG trade as the world transitions away from fossil fuels,” writes Victor Maxwell and Nandini Das as co-authors of the report. The report calls for Korea and other shipbuilding countries to redirect public finance currently subsidizing fossil fuels, including shipbuilding activities, toward clean energy. Doing so they write would avoid stranded asset risk and delivery a transition for the shipbuilding industry away from its focus on gas carriers and crude oil tankers.

The orderbook for LNG carriers grew to record levels in 2022, with the authors citing the oil and gas industry’s “dash for LNG following Russia’s invasion of Ukraine.” While the war and the embargoes on Russian energy shifted demand to make up for the lost supplies, producing nations have also been rushing to increase capacity and LNG exports. Producers are expanding their facilities in the United States as nations such as China rapidly increase imports while Qatar is in the final phase of a long-term expansion project to open its new North Field which is expected to double the country’s exports.

The report analyzes the outlook for LNG carrier and oil tanker shipbuilding using a variety of scenarios in the efforts to slow global warming. They point out that these ship types in the five years between 2016 and 2020 accounted for 27 percent and 10 percent of shipbuilding globally. 

They calculate that at the end of 2021, there were around 700 LNG ships. However, they highlight the rapid growth in 2022 saying that 34 LNG carriers were added last year and a further 335 LNG carriers are expected to deliver between 2023 and 2028, according to data from Clarkson Research.

They further highlight that the South Korean shipbuilding industry is heavily dependent on LNG carriers. Along with tankers they said these ships rank among South Korea’s top ten exports in terms of value. In 2022, Korean shipbuilders won over 70 percent of the orders for LNG carriers, representing 65 percent of the tonnage order from the country’s shipbuilders. The market for VLCCs has been slower based on the downturn in the oil markets but rebounded since mid-2022 as analysts predicted the beginning of a prolonged upcycle in the oil market.

The report highlights that shipowners are also continuing to explore further LNG carrier orders. They cite reports that QatarEnergy is in discussions with the South Korean shipbuilders for a further order of up to 40 LNG carriers for delivery by 2027. TotalEnergies is also reported in discussion for an order of 17 LNG carriers to support its resumption of the Mozambique LNG project.

“If built, the global LNG shipping capacity will further exceed IEA’s forecast of LNG trade,” the report warns. “This poses a particular risk for financial institutions that provide loans and underwriting to the capital-intensive shipbuilding industry.”

They conclude that any decline in the market for these ships will have a significant impact on the sector and broader implications for shipbuilding nations. Given the traditional economic lifespan for ships versus the timelines for cutting and eliminating fossil fuel use, the report highlights the potential for creating stranded assets among the current class of newbuilds. They call for shipbuilders and their nations to prepare for these changes highlighting the heavy dependence on oil tanker and gas carrier construction creates a likelihood for a fundamental crisis.

 

LNG Carrier Shipbuilding Risks Stranded Assets Due to Climate Policies

Risk for stranded assets is high due to the rate of LNG carrier construction and climate change policies (file photo)

PUBLISHED MAY 25, 2023 4:46 PM BY THE MARITIME EXECUTIVE

 

The rapid growth in LNG shipbuilding responding to the demand for gas transport is raising the likelihood of creating stranded assets writes Climate Analytics, a climate science and policy institute, in a newly released report entitled “High and Dry: The global energy transition's looming impact on the LNG and oil shipbuilding industry.” Partnering with South Korean climate and energy advocacy group Solutions for Our Climate, the report highlights the risk of overshooting LNG shipping capacity which is increased by future energy scenarios that call for the rapid elimination of fossil fuels.

“This report finds that the uptake in shipping capacity far exceeds global forecasts for the LNG trade as the world transitions away from fossil fuels,” writes Victor Maxwell and Nandini Das as co-authors of the report. The report calls for Korea and other shipbuilding countries to redirect public finance currently subsidizing fossil fuels, including shipbuilding activities, toward clean energy. Doing so they write would avoid stranded asset risk and delivery a transition for the shipbuilding industry away from its focus on gas carriers and crude oil tankers.

The orderbook for LNG carriers grew to record levels in 2022, with the authors citing the oil and gas industry’s “dash for LNG following Russia’s invasion of Ukraine.” While the war and the embargoes on Russian energy shifted demand to make up for the lost supplies, producing nations have also been rushing to increase capacity and LNG exports. Producers are expanding their facilities in the United States as nations such as China rapidly increase imports while Qatar is in the final phase of a long-term expansion project to open its new North Field which is expected to double the country’s exports.

The report analyzes the outlook for LNG carrier and oil tanker shipbuilding using a variety of scenarios in the efforts to slow global warming. They point out that these ship types in the five years between 2016 and 2020 accounted for 27 percent and 10 percent of shipbuilding globally. 

They calculate that at the end of 2021, there were around 700 LNG ships. However, they highlight the rapid growth in 2022 saying that 34 LNG carriers were added last year and a further 335 LNG carriers are expected to deliver between 2023 and 2028, according to data from Clarkson Research.

They further highlight that the South Korean shipbuilding industry is heavily dependent on LNG carriers. Along with tankers they said these ships rank among South Korea’s top ten exports in terms of value. In 2022, Korean shipbuilders won over 70 percent of the orders for LNG carriers, representing 65 percent of the tonnage order from the country’s shipbuilders. The market for VLCCs has been slower based on the downturn in the oil markets but rebounded since mid-2022 as analysts predicted the beginning of a prolonged upcycle in the oil market.

The report highlights that shipowners are also continuing to explore further LNG carrier orders. They cite reports that QatarEnergy is in discussions with the South Korean shipbuilders for a further order of up to 40 LNG carriers for delivery by 2027. TotalEnergies is also reported in discussion for an order of 17 LNG carriers to support its resumption of the Mozambique LNG project.

“If built, the global LNG shipping capacity will further exceed IEA’s forecast of LNG trade,” the report warns. “This poses a particular risk for financial institutions that provide loans and underwriting to the capital-intensive shipbuilding industry.”

They conclude that any decline in the market for these ships will have a significant impact on the sector and broader implications for shipbuilding nations. Given the traditional economic lifespan for ships versus the timelines for cutting and eliminating fossil fuel use, the report highlights the potential for creating stranded assets among the current class of newbuilds. They call for shipbuilders and their nations to prepare for these changes highlighting the heavy dependence on oil tanker and gas carrier construction creates a likelihood for a fundamental crisis.

The Four Key Reasons Why The U.S. Will Never Stop Targeting Russia’s LNG Sector

• 
  
• By Simon Watkins - Apr 29, 2024
• 
  
• LNG has become the most important swing energy source in an increasingly insecure world.
• 
  
• Energy exports remain the foundation stone of Russia’s essentially petro-economy.
• 
  
• Russia's LNG industry is closely associated in Russia with President Vladimir Putin personally.

Perhaps even more than its targeting of Russian oil exports, the U.S. has been laser-focused on its liquefied natural gas (LNG) sector as they key area it wants to effectively destroy over the long term. Last week’s suspension of Russia’s flagship Arctic LNG-2 project by lead operator Novatek is the latest of Washington’s trophies in this regard, but it is very unlikely to be the last. As U.S. Assistant Secretary of State for Energy Resources Geoffrey Pyatt said on 24 April: “[Novatek] has recently had to suspend production at its Arctic LNG-2 liquefaction facility, in part because of sanctions that the Biden administration has led.” He added: “We’re going to keep tightening the screws […]  We’re going to continue to designate a broad range of entities involved in development of other key energy projects, future energy projects as well, and associated infrastructure including the Vostok Oil Project, the Ust Luga LNG Terminal, and the Yakutia Gas Project.” So, why is the U.S. so concerned about Russia’s LNG sector?

The first of four key reasons is that LNG has become the most important swing energy source in an increasingly insecure world. Unlike oil or gas that is transported through pipelines, LNG does not require years and vast expenses to build out a complex infrastructure before it is ready to transport anywhere. Once gas has been converted to LNG, it can be shipped and moved anywhere within a matter of days and bought reliably either through short- or long-term contracts or immediately in the spot market. Around a year before the Kremlin ordered the first Russian troops into Ukraine on February 24, 2022, China foresaw the critical significance of global energy dependency, as extensively discussed in my new book on the evolving dynamics of the global oil market. So, beginning in March 2021, a 10-year purchase and sales agreement was signed by the China Petroleum & Chemical Corp (Sinopec) and Qatar Petroleum (QP) for 2 million tonnes per annum (mtpa) of LNG. This was followed by several other major LNG deals prior to Russia invading Ukraine.

In the zero-sum game of emergency global energy supplies, China’s hoarding of LNG prior to the 2022 invasion meant that Europe – critically dependent on Russian gas and oil – would be even more exposed if these supplies suddenly stopped. Russia had been banking on this to produce the same response from Europe to its 2022 invasion of Ukraine as had occurred after its 2008 invasion of Georgia and its 2014 invasion of Ukraine and subsequent annexation of Crimea. That is, Russia expected Europe to do absolutely nothing meaningful to sanction its aggression. The Kremlin was nearly right in its calculations, with the effective leader of the European Union (E.U.) – Germany – only concerned about ensuring its own continuity of gas and oil supplies from Russia in 2022 at all costs, as also analysed in detail in my new book on the new global oil market order. Its acquiescence to Russian hostility yet again was only stopped when the U.S. with U.K. support in Europe and the Middle East worked to establish new emergency supplies of LNG from elsewhere. This determination to never again allow the European Union states to just roll over in the face of Russian aggression due to their over-reliance on Russian energy is the second key reason why the U.S. continues to mercilessly target its LNG sector.

The third reason is that energy exports remain the foundation stone of Russia’s essentially petro-economy and that it was intending to counterbalance the reduction of income from pipelined oil and gas with rises in LNG supplies. Indeed, according to comments from its Deputy Prime Minister Alexander Novak on 22 November last year, Russia intended its LNG market share to rise to 20 percent (at least 100 million tons per year) by 2030, from the current 8 percent (around 33 tons in 2023). As also analysed in my new book on the new global oil market order, Russia earned nearly US$100 billion from oil and gas exports during the first 100 days of the war in Ukraine. Overall, revenues from the higher post-invasion oil and gas prices were much greater than the cost for Russia of continuing to fight the war. However, as prices started to weaken again and sanctions increasingly hit Russia, its finances and ability to secure an outright military victory have been significantly reduced. So desperate has the situation become for President Vladimir Putin that he risked arrest in December to visit Saudi Arabia’s Mohammed bin Salman, and the UAE’s Mohamed bin Zayed al Nahyan, to plead for greater cuts in OPEC oil production in order to push prices up. Again, in the zero-sum game of the global energy market, Russia’s LNG losses from sanctions will be a gain for the U.S. and those LNG suppliers it regards as allies, which now includes Qatar. As it stands now, the Emirate will account for about 40 percent of all new LNG supplies across the globe by 2029, according to comments from its government. The U.S. has seen its LNG exports go from zero before 2016 to around 124 billion cubic metres (bcm) this year, and it is expecting another 124 bcm to come online by 2030. Meanwhile, according to the International Energy Agency, Russia’s share of internationally traded natural gas is forecast to fall from just around 30 percent in the year before it invaded Ukraine to about 15 percent by 2030. Its revenue from natural gas sales is projected to drop from around US$100 billion in 2021 to less than US$40 billion by 2030.

The fourth and final reason why Washington is so determined to effectively destroy Russia’s LNG sector over the long term is that it is an industry so closely associated in Russia with President Vladimir Putin personally. He has long seen LNG – particularly from the country’s huge gas resources in the Arctic – as the key to Russia’s next major phase of energy growth, rather as shale oil and gas was for the U.S., as also detailed in my new book on the new global oil market order. The Russian Arctic sector comprises over 35,700 billion cubic metres of natural gas and over 2,300 million metric tons of oil and condensate, the majority of which are in the Yamal and Gydan peninsulas, lying on the south side of the Kara Sea. According to comments by Putin, the next few years will witness a dramatic expansion in the extraction of these Arctic resources, and a corollary build-out of the Northern Sea Route (NSR) – the coastal route of which crosses the Kara Sea - as the primary transport route to monetise these resources in the global oil and gas markets, especially to its key geopolitical and financial ally, China. Such was Putin’s determination to move ahead with Russia’s Arctic LNG projects that various heavyweight Russian entities were inveigled around the time the U.S. imposed its 2014 sanctions to finance key parts of them. The Russian Direct Investment Fund, for example, established a joint investment fund with the state-run Japan Bank for International Cooperation with each contributing half of a total of about JPY100 billion (then US$890 million) to it. The Russian government itself bankrolled Arctic LNG 1 from the beginning with money from the state budget. It then supported it again when sanctions were introduced by selling bonds in Yamal LNG (the first part of the Arctic LNG programs), and then by providing another RUB150 billion of backstop funding from the National Welfare Fund.

By Simon Watkins for Oilprice.com

Do cruise companies’ green claims hold water?

Carnival's AIDAnova is the world's first cruise ship to run on

 liquified natural gas. AIDA Cruises

SHIPPING NEWS
Do cruise companies’ green claims hold water?
By Maria Gallucci on Feb 5, 2020

Carnival Cruise Line’s latest ship is a behemoth. The Mardi Gras sports 20 decks, 5,200 rooms, and as if that wasn’t enough, a swooping outdoor roller coaster. Unlike most of the company’s fleet, it won’t be running on oil. The vessel, which first hit the water in Finland late last month, will run entirely on liquefied natural gas when it starts sailing from Florida to the Caribbean Sea this fall.

Cruise and cargo shipping companies are increasingly switching to the super-chilled fuel, which produces much less air pollution compared with the dirty “bunker fuel” that previously powered most ships. By 2025, Carnival says it will have 11 vessels running on liquefied natural gas, or LNG, including the AIDANova, the world’s first LNG-powered cruise ship.

But the overall benefits of switching to natural gas aren’t entirely clear. A new study found that using the fuel may do little to curb the shipping industry’s greenhouse gas emissions in coming decades. In certain cases, it might actually be worse for the climate than another conventional marine fuel, researchers said.

The report, by the International Council on Clean Transportation, or ICCT, adds to the debate about whether natural gas should play a role in the industry’s shift to cleaner fuels.

Many environmental groups and academic experts argue that LNG is a costly distraction, one that siphons investment away from technologies that could cut a ship’s emissions to zero, and it locks ships into relying on fossil fuels at a time when climate scientists say we should leave them in the ground. For proponents, the fuel is one of few readily available alternatives to bunker fuel — the longtime industry favorite that is mostly banned from oceangoing ships. Compared to that sludgy old staple, LNG produces much less air pollution and carbon dioxide.

The main problem with LNG is methane, a potent greenhouse gas that traps significantly more heat in the atmosphere than carbon dioxide. The ICCT team found that high amounts of unburned methane can leak from some LNG marine engines. Extracting gas, liquefying it, and transporting the fuel also results in methane leaks and CO2 emissions. Added up over a 20-year period, LNG emits far more lifecycle emissions — between 70 and 82 percent — than “marine gas oil,” a common petroleum product, researchers said.

“That’s the missing part of the equation that [the industry] is not accounting for right now,” said Bryan Comer, a senior researcher in ICCT’s marine program who co-authored the report. “If you account for how much methane is escaping from marine engines, you get a much different picture of what the total climate impacts could be of using LNG as a marine fuel.”

The ICCT study, funded by environmental group Stand.earth, builds on earlier reports that question LNG’s potential benefits. In 2018, researchers at the University College London’s Energy Institute found that “there is no significant CO2-equivalent reduction achieved through the use of LNG as marine fuel,” in large part because of the “upstream” emissions from producing natural gas.

“It’s a dead end,” said Tristan Smith, who researches low-carbon shipping technologies at the institute.

The global shipping industry moves trillions of dollars’ worth of goods every year and accounts for about 3 percent of total annual greenhouse gas emissions. That number is projected to soar in coming decades if vessels don’t use cleaner fuels. Cruise and cargo ships have historically contributed significant amounts of sulfur oxides and nitrogen oxides, which can damage people’s hearts and lungs, especially in waterfront communities.

In response, regulators have started clamping down on maritime pollution. Since the start of the year, the International Maritime Organization, a United Nations body, requires vessels to burn only low-sulfur fuels. Newly built ships must follow energy-efficiency design standards, while the industry as a whole is working to cut emissions in half by 2050 compared with 2008 levels.

Today, most ships burn blends of low-sulfur petroleum products, including marine gas oil and “very-low-sulfur fuel oil,” in their diesel engines. About 4,000 ships, or 4 percent of the global fleet, either have or will have scrubbers on their smokestacks, which allows them to keep burning high-sulfur bunker fuel.

About 750 vessels today can run on LNG, double the amount available in 2012. Last fall, French shipping giant CMA CGM launched the world’s largest container ship to run on LNG, the 1,310-foot-long Jacques Saadé, the first of nine such vessels. Although new LNG ships can cost 10 to 30 percent more to build than similar diesel-powered ones, rising natural gas production is driving down fuel prices, making LNG slightly cheaper than marine gas oil.

Peter Keller, a former executive at TOTE Maritime, said the U.S.-based company decided in 2012 to switch to LNG to get ahead of any potential environmental rules. LNG produces little nitrogen oxide, virtually no sulfur dioxide and nearly zero “black carbon” — soot that absorbs the sun’s heat and directly warms the atmosphere. LNG is also estimated to curb onboard CO2 emissions by about 20 percent.

“We said, ‘OK, what gives us as much comfort as we can get in the future that we won’t get regulated out of using a fuel?’” Keller recalled. TOTE Maritime now operates two LNG-fueled containerships between Florida and Puerto Rico and is converting other vessels in Alaska.

Carnival considers the super-chilled liquid to be “the cleanest fuel with no visible emissions widely available,” the company told Grist. As the company builds new LNG ships, most of its existing fleet still uses bunker fuel with scrubbers at sea and marine gas oil near shore.

Proponents said they still consider LNG to be a way to help curb carbon emissions, despite the new ICCT research. Keller is chairman of SEA-LNG, an industry group that promotes LNG adoption. Last year, his group commissioned a report that said LNG could reduce lifecycle emissions by between 7 to 21 percent compared to heavy bunker fuel, depending on the engine.

That report, produced by the consulting firm Thinkstep, differs from the ICCT study in a key way. Thinkstep analyzed methane over a 100-year time frame, which is common for climate studies. Methane intensively warms the planet soon after it’s emitted then decays into carbon dioxide. (CO2 is less potent but persists in the air for hundreds or thousands of years.) Over 100 years, methane traps 34 more heat in the atmosphere than CO2.

In its first 20 years, however, methane traps 86 times more heat. ICCT researchers emphasized this timeframe, under which LNG delivers no emissions-reduction benefits in any scenario. The team said this metric reflects the “urgent need” to slash emissions within decades to limit global warming.

Comer, the ICCT researcher, said that rather than spending billions of dollars on engines, storage tanks, and refueling infrastructure to switch to LNG, the shipping industry would be better off improving diesel ships and investing heavily in clean-energy technology. New and existing ships could run on marine gas oil and use energy-saving technologies — such as air lubrication for ship hulls and wind-powered rotor sails — to minimize fuel use.

Carnival said it’s working with manufacturers of LNG engines to reduce methane leaks. The company is also piloting fuel cell technologies and large battery storage systems; in the future, its LNG ships might run on liquefied biomethane or liquefied synthetic methane, two renewable fuels in scarce supply.

“We recognise that fossil LNG is not the final solution for decarbonization,” Carnival said by email. But the company considers it “an important stepping stone to our industry’s ongoing objective to reduce its carbon footprint.”

---30---

WAIT, WHAT?!

China Enters into Largest and Longest LNG Import Deal with U.S. 

Venture Global will supply the LNG from two facilities in Louisiana (Venture Global)

PUBLISHED DEC 21, 2021 6:49 PM BY THE MARITIME EXECUTIVE

 

China has entered into the largest, long-term deal for the importation of U.S. LNG which will be supplied from two sites in Louisiana operated by Venture Global. According to the company, this marks the first LNG supply agreement signed by a U.S. exporter with a division of state-owned China National Offshore Oil Corporation (CNOOC), China’s largest importer of LNG.

The deal, which was first rumored in October, was confirmed with a statement from Venture Global and reported on the Department of Energy’s website. Venture Global LNG and CNOOC Gas & Power Group Co. entered into a 20-year Sales and Purchase Agreement. Under the terms of the agreement, Venture Global will supply two million tons per annum of LNG from its Plaquemines LNG export facility, in Plaquemines Parish, Louisiana. In addition, CNOOC Gas & Power will purchase an additional 1.5 million tons (MT) of LNG from Venture Global’s Calcasieu Pass LNG facility for “a shorter duration.:

“Venture Global is pleased to announce the expansion of our footprint in Asia through two new deals to supply the Chinese market with clean, low-cost US LNG,” said Mike Sabel, Chief Executive Officer of Venture Global LNG. “China is critical to global climate efforts, and LNG supplied by Venture Global will serve as an important addition to their low carbon energy mix for decades. This new long-term partnership with CNOOC builds on our company’s continued momentum in a very active 2021.” 

Chinese state media also highlighted the agreement calling it a “move that clearly shows that the phase one trade agreement between China and the US, which covers China's increased purchase of US energy products, are moving forward.” They highlighted that under phase one of the trade deal, China agreed to increase energy imports from the U.S., including LNG, crude oil, refined products and coal, by $52.4 billion over two years above the 2017 baseline. Analysts had accused China to be slow in fulfilling its commitments under the Trump administration trade deal but in announcing this deal used it as an opportunity to call on the U.S. to “create a more favorable environment - both from the political and supply perspectives - for bilateral trade to further expand.” China is citing the LNG deal as it pushes for the U,S, to drop some of the tariffs imposed on its products during the recent trade war. 

“As China’s largest LNG importer, CNOOC is committed deeply not only to the mission of securing China’s gas supply, but also to the climate goals of building a carbon-neutral China by 2060,” said Shi Chenggang, Chairman of CNOOC Gas & Power commenting on today’s press release detailing the agreement. “We are pleased to announce our long-term LNG cooperation with Venture Global. By signing the SPAs with Venture Global, CNOOC will be able to further improve its ability to meet China’s increasing gas demand, whilst providing solid support for China’s energy transition pathway to build a more ‘beautiful China’.”

This deal is one of several that multiple Chinese companies entered into with the U.S. to help build the country’s LNG supply. Last year, Chinese utility Foran Energy Group agreed to buy LNG cargoes from Cheniere Energy between 2021 and 2025. Last month, they entered to further agreement for 20-years starting in January 2023. Cheniere also reported a deal last month with China’s Sinochem Group Co. to supply LNG beginning in July 2022.

BC HELPS GREEN THE LNG INDUSTRY

This is our generation’s opportunity to create an industry for B.C.: LNG Alliance

CEO says much of the work has already been awarded to First Nations

• Jun. 13, 2019  
• COLUMNISTS 
• OPINION
• Bryan Cox is the President and CEO of BC LNG Alliance

In 1867 an entrepreneur named John “Gassy Jack” Deighton opened a saloon near a newly built sawmill on Burrard Inlet. In doing so, he started “Gastown,” the small village that would grow up around the lumber industry to become Vancouver.

This was a few years after gold was discovered on the Fraser River, sparking a gold rush and boom towns throughout B.C., and as coal mining was beginning on Vancouver Island.

The arrival of the first train in Vancouver in 1887 allowed the city to emerge as a global shipping port, cementing our province’s position as a resource developer and exporter.

From the very beginning, primary industries built the growth and prosperity of B.C., and importantly, they continue to provide significant employment and revenues.

Now, our generation has the opportunity to build a new natural resource industry in B.C. from the ground up. By cooling B.C. natural gas until it becomes a liquid, we are able to add value to our resource before exporting it as liquefied natural gas (LNG).

We are the generation that learned to reduce, reuse and recycle, and to be conscious of the state of our environment. We were raised to care about our planet.

LNG is our generation’s opportunity to build a modern industry that provides the world with a resource it needs, with the fewest emissions possible.

We have the knowledge and values to build a sustainable resource that benefits all British Columbians.

For example, First Nations are partners in two natural gas pipelines that would deliver natural gas that will be cooled into LNG in Kitimat. Much of the contract work that has been awarded so far for those pipelines has gone to First Nations businesses or joint-ventures. Through consultation, the Haisla Nation negotiated benefit agreements to allow the LNG Canada project and Kitimat LNG project in their traditional territory. The Squamish Nation developed its own environmental review process – the first of its kind anywhere in Canada – for the Woodfibre LNG project.

Our generation is tackling challenging social problems, like poverty and affordability. The well-paying jobs and careers in the LNG industry have the potential to transform many lives, and the revenue the industry contributes to government will be invested in schools, hospitals, roads, and services across the province.

We are developing the LNG industry to help address some of the world’s greatest challenges. According to the World Health Organization, there are seven million deaths each year attributed to breathing polluted air. With a fraction of the particulate matter of fuels such as coal and biomass, LNG can help the world breathe cleaner air.


ALSO READ: New power line needed for LNG project


ALSO READ: B.C. court to mull continuing order against Coastal Gaslink pipeline


Our LNG facilities are designed to produce the lowest emission LNG anywhere in the world in order to meet strong provincial regulations. This means that B.C. LNG will have at least half and for some facilities – far less than half – of the emissions compared to LNG produced in other countries.


For example, when used to displace coal-fired electricity in China, B.C.’s LNG could reduce global emissions equal to British Columbia’s annual emissions. LNG helps countries electrify by providing firm, reliable backup power for renewables. It is also displacing marine bunker oil in the global shipping industry improving both the marine environment and safety.


Our generation is changing how natural gas is developed. B.C.’s natural gas industry has been recognized for having far fewer emissions than natural gas produced in the U.S, and we are constantly looking for ways to reduce emissions even further.


We have a huge opportunity to build an industry our way, benefitting British Columbians, Canadians and the world. We can share our knowledge with the world to help build a better industry globally. It is clear that if we do not produce LNG in B.C., it will be produced by other jurisdictions, with more lenient regulatory standards and much higher greenhouse gas emissions. British Columbians and Canadians would also miss out on the prosperity these projects could bring. For the sake of our citizens, and the health of the world, we cannot let this happen.


With LNG, our generation can help build sustainable prosperity for B.C.

David Rosenberg: The bullish case for LNG, a reliable energy source investors should tap into

Liquefied natural gas (LNG) should see strong growth in the next decade and more, writes David Rosenberg and his team.

By David Rosenberg and Brendan Livingstone

Financial Post

The Russia-Ukraine war is bringing to the forefront the importance of energy security, which has been neglected in recent years as supply exceeded demand and governments felt increased political pressure to reduce our reliance on fossil fuels.

However, with households confronting much steeper energy bills, which are at risk of rising further as winter approaches, the focus has shifted back towards providing reliable energy solutions at favourable costs. Liquefied natural gas (LNG), which involves cooling natural gas to a liquid state, is an attractive solution because it allows for an efficient way for transportation and storage — to areas not endowed with natural gas reserves — and it is relatively clean in terms of production and combustion.

Over the next decade plus, we see strong growth in LNG — and all that goes with it — and so we believe investors will benefit from seeking out exposure.

LNG is natural gas that has been converted to a liquid by cooling it at -1,620 C (-2,600 F). In its liquid state, natural gas is about 600 times smaller than when it is in a gaseous state, making it substantially easier to store. In addition, the liquefaction process allows for the transportation of natural gas to places where natural gas pipelines are not feasible or do not exist.

Export facilities receive natural gas from producers by pipeline and then liquefy it for transport via LNG ships. Once the tankers reach their destination, LNG is offloaded at import terminals, stored in cryogenic storage tanks and then returned to a gaseous state. After which, natural gas is transported via pipelines to customers.

In recent years, the United States has become a major player in LNG, increasing its export capacity to about 10.78 billion cubic feet per day at the end of 2021 from less than one bcf/d per day in 2015. By the end of 2022, the U.S. is poised to become the largest LNG exporter in the world. About half of U.S. LNG exports go to five countries: South Korea (13 per cent), China (13 per cent), Japan (10 per cent), Brazil (9 per cent) and Spain (6 per cent).

LNG produces 40 per cent less carbon dioxide than coal and 30 per cent less than oil, making it among the cleanest fossil fuels. In addition, it drastically reduces emissions of nitrogen oxide, and it emits almost zero sulphur and particulate matter. As a result, due to its relatively favourable emissions profile — and, critically, its reliability as a fuel source — we see LNG as a great complement to renewable energy as governments work towards a reduction in greenhouse gas emissions.

Some pundits have labeled LNG as a “transition fuel,” but this understates its role in the energy mix of the future since it is a great backup for the natural intermittency of renewables such as wind and solar.

A McKinsey & Co. report — the Global Gas Outlook to 2050 — estimates LNG demand will grow by 3.4 per cent per annum until 2035, requiring approximately 100 million metric tons of additional capacity. While it believes that demand will then slow substantially — to growth of 0.5 per cent between 2035 and 2050 — this will still necessitate more than 200 million metric tons of new supply.

Most of this increase is expected to come from the United States, with smaller contributions from Canada, Russia, East Africa and potentially the Middle East.

Against a backdrop of strong growth over the next decade or so, especially in the U.S., we believe investors should look to have exposure to LNG in a portfolio. Renewable energy undoubtedly has the greatest future growth potential — as governments strive for “net zero” by 2050 (193 parties have signed onto the Paris Agreement) — but the reliability of LNG, combined with the lower associated emissions (relative to other fossil fuels), means governments can concurrently improve energy security while simultaneously reducing pollution.

The importance of having LNG exposure, especially during energy crises, has been on full display this year. Bloomberg Intelligence’s LNG Liquefaction Peer Group — an equally weighted equity index of some of the major LNG producers globally — is up 25 per cent this year as of the end of August, versus the 17 per cent decline for the S&P 500.

Beyond its positive future growth profile, LNG stocks also have the benefit of being attractively priced. The group trades at an EV-to-EBITDA ratio of 4.7x, well below its 10-year average (8.6x), and considerably less than the S&P 500 (13.5x). Other ways to play the LNG theme are through companies involved in the regasification process, transportation (tankers) and infrastructure construction.

David Rosenberg is founder of independent research firm Rosenberg Research & Associates Inc. Brendan Livingstone is a senior markets strategist there. You can sign up for a free, one-month trial on Rosenberg’s website.

U.S. Shale Giants Want In On The Global LNG Game

By Irina Slav - Feb 09, 2023

• U.S. gas producers are getting increasingly interested in LNG exports.
• 
  
• Producers such as Devon Energy and Chesapeake are looking to get exposure to international LNG markets.
• 
  
• Market observers expect demand from Asia to start climbing, now that prices are off their peak from last summer.

Over the course of just a few years, the United States became one of the top three exporters of liquefied natural gas. Last year, it was the biggest supplier of LNG to Europe. This was made possible by a handful of companies that invested billions in liquefaction plants along the Gulf Coast, with another handful coming in the next couple of years. But competition is intensifying.

Energy Intelligence reported this month that U.S. gas producers are getting increasingly interested in LNG exports. The report cited the chief executive of Devon Energy as saying the company was looking into diversifying with LNG exports to get some exposure to international markets.

"We're not going to be big LNG players like Cheniere or Freeport or anything like that," Rick Muncrief said at the NAPE conference in Houston last week. "I mean, from our perspective, it's how can we get some exposure in international markets and help our allies around the world. We do the same thing with oil."

The decision makes perfect sense. Demand for liquefied natural gas globally is on the rise, and strongly, after Europe joined the LNG party. Even though the EU's emission-cutting plans discourage European buyers from securing long-term LNG import deals, which U.S. producers find to be a problem, U.S. LNG will continue to flow to Europe.

At the same time, market observers expect demand from Asia to start climbing, too, now that prices are off their peak from last summer. Indeed, Bangladesh recently bought an LNG cargo after months of abstaining from such imports because of prices. It also plans to buy several more if prices remain where they are. And if more U.S. gas producers enter the LNG space, chances are that prices will get a ceiling once their facilities start operating.

Earlier this year, BloombergNEF predicted that U.S. LNG export capacity would soar to 169 million tons by 2027. That would make the United States the world's biggest LNG exporter, far ahead of Qatar, which plans to expand its capacity to 110 million tons by 2026.

"The US is in the lead because of its flexible contract terms and the competitive landscape of project developers," said BloombergNEF global LNG specialist Michael Yip. "Its aggressive but transparent pricing and reliability as an LNG supplier has made it easy for these new projects to secure contracts."

That's just the big guns in LNG exports. Add to that the smaller gas producers that are diversifying into LNG exports, and the potential future dominance of the U.S. on international LNG markets becomes even more pronounced. As long as the gas flows as it does now.

Earlier this year, two gas CEOs warned there might be a slowdown in drilling activity because of prices. At such prices, profitability is hard to come by, Adam Rozencwajg, the natural resources investor from Goehring & Rozencwajg, told Oilprice. And that may put a lid on the supply of gas.

"Companies with remaining core Tier 1 acreage can make a return at today's gas price—those are few and far between," Rozencwajg said. "More importantly, companies have come to realize just how difficult it is to maintain high-quality drilling inventory. In light of that, they are reluctant to increase activity and pull forward the inevitable moment they'll be short of high-quality drilling prospects."

What this means is that sooner or later, prices will go up. This will make LNG exports even more lucrative. And shareholders who mind increased drilling might change their minds.

"Most of our investors get it and they think it's a good idea," Chesapeake's Nick Dell'Osso, one of those CEOs who warned about lower drilling activity this year said at NAPE.

"At the end of the day, the way I describe it to our investors, is this is not arbitrage capture. This is diversification of market. The US gas is being sold in international markets. We should have exposure to that. That's diversification of your product sales points and ultimately like any other portfolio diversification."

Indeed, diversification has proven to be the optimal strategy both for producers and for consumers, as any European Union official is sure to tell you if you ask them.

By Irina Slav for Oilprice.com

 

Galveston LNG Bunker Terminal Moves Ahead

Illustration courtesy Galveston LNG Bunker Port

PUBLISHED APR 9, 2024 1:39 PM BY THE MARITIME EXECUTIVE

 

Galveston LNG Bunker Port has filed applications with the United States Army Corps of Engineers (USACE) to build its small-scale LNG terminal on Shoal Point in Texas City, Texas. If approved, the project would be the first purpose-built LNG bunker terminal in the area, and the port's second LNG fueling service.

The planned terminal includes two liquefaction trains capable of putting out 600,000 gallons of LNG per day, two 3-million-gallon storage tanks, a bunker vessel loading berth, and associated marine and loading facilities.

In addition to the USACE application, partners Seapath Group and Pilot LNG have also asked the Texas Railroad Commission (TRRC) and the United States Coast Guard (USCG) for permission to build. 

"This facility is a critical investment into the resilience of the United States' maritime infrastructure," said Joshua Lubarsky, President of JV partner Seapath Group.

LNG is one of the most popular options for dual-fuel vessel orders. According to data from DNV, there were about 470 LNG-powered vessels in operation globally as of the end of 2023, with over 500 more on order. A record 240 LNG-fueled ship orders were placed in 2021, 222 more in 2022 and another 130 in 2023. The LNG-powered fleet should exceed 1,000 vessels by 2027, DNV reports. 

The growth has been particularly pronounced in the container ship, car carrier, and cruise ship sectors, and Galveston is a major cruise port. 

The new terminal expands on previous efforts to establish Galveston as a hub for LNG fueling. In 2021, the Port of Galveston and Stabilis Solutions agreed to launch the use of LNG as a marine fuel at the port. Stabilis provides the fuel, and Seaside LNG provides the bunkering barge. Customers include Carnival Jubilee, which became the first ship on the Gulf Coast to receive ship-to-ship LNG bunkering in December 2023. 

"The Galveston Wharves views LNG fueling of marine vessels as an important step in our commitment to environmental stewardship," said Rodger Rees, Port Director and CEO, in 2021. "With the number of LNG-fueled vessels in the global fleet growing rapidly, having LNG fueling services in the port is an important step in our commercial growth."

 

Study: LNG Will Be Most Affordable Compliance Option for EU GHG Rules

An LNG-powered boxship under construction (CMA CGM file image)

PUBLISHED JUN 15, 2023 7:25 PM BY THE MARITIME EXECUTIVE

 

LNG has its critics in environmental circles, but its fiscal attractiveness is  clear, according to industry advocacy group SEA-LNG. Setting aside any debate  about LNG's environmental merits, it will be the least-cost option for boxship owners who need to meet EU compliance requirements for GHG reduction, the group argues in a newly-released analysis. 

LNG is one of the most affordable marine fuels under normal market conditions, and it has a lower emissions profile than HFO or VLSFO. Using SEA-LNG's estimate for LNG's well-to-wake greenhouse gas reduction benefit - about 20 percent below VLSFO - switching to LNG is itself enough to comply with the FuelEU Maritime GHG reduction requirements out through the year 2039. After that, operators would have to blend in varying proportions of costlier bio-LNG and e-LNG. (E-LNG may be the most expensive alternative fuel, according to the Maersk McKinney-Moller Center for Zero Carbon Zhipping). 

As the proportion of "green" fuel in the blend goes up to meet strengthened requirements, so does the cost for compliance - except for ammonia, which declines in price and becomes cheaper than a 50 percent gray / 50 percent renewable LNG mix by 2050. Blue ammonia (produced from natural gas with carbon capture) comes out as the most cost-effective option by midcentury, but not before. 

"It is clear from this analysis that the LNG pathway to compliance offers massively lower fuel costs than that for both the methanol and ammonia pathways, particularly in the first 15 years of the vessel’s life – a period critical for vessel financing decisions. The methanol pathway is approximately 2.5 times more expensive and the ammonia pathway, 2.5 to 3.5 times more expensive," concluded SEA-LNG. 

Reducing methane slip

Most of the debate around LNG's climate effectiveness centers on methane emissions. Natural gas is mostly methane, a gas with substantially higher warming potential than CO2, and a percentage escapes during upstream extraction, transport and liquefaction. LNG-powered ships also emit varied amounts of methane during operation, with the amount dependent on engine type and operating profile. 

This last emissions category - methane slip - has captured the public debate for years, with some environmental groups arguing that it makes LNG an unattractive alternative. Though this debate gets headlines, it may soon be over. The industry's biggest players are quietly working to eliminate engine emissions of LNG by 2030, according to Steve Esau, SEA-LNG's chief operating officer. 

"There are a number of companies on the shipping side and the OEM side who are investing a significant amount of money to measure where the operational emissions are coming from on board ship, and then looking at solutions for addressing those," says Esau. "That would be a combination of operational solutions and pre- and post-combustion technologies to deal with methane slip. And I think they're very confident that methane slip will be eradicated by the end of the decade."