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UK carbon footprint exports will intensify under natural gas boom

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Ramping up UK's liquefied natural gas (LNG) imports could mean shifting the responsibility of gas related methane emissions to other countries.

Britain's aim of setting itself apart from other countries with the most ambitious goal of reaching carbon neutrality in 30 years is admirable. But celebrations may not be justified. By importing large amounts of gas - much of it fracked in the US - and then shipped in form of LNG, the commodity reaches the UK with an already heavy emission footprint. 

Experts told E&T about the global LNG boom and how Britain and other countries may circumvent their emission balance.

The image the analysis draws is worrying. The UK could make an ideal LNG buyer if proposed projects get the go-ahead from investors and regulators and are not halted under the governments climate change agenda.

What is the problem with the gas boom?

LNG combustion produces 40 per cent less carbon dioxide than coal combustion, but the impact of methane emissions in its supply chain means that it is not an improvement in terms of global warming impact, explains Ted Nace, executive director of Global Energy Monitor. Nace has recently released a new report with his team on the global climate and investor-related perils of newly proposed LNG infrastructure.

Many politicians and investors harbour misconceptions about the climate impacts of LNG, says Anne Marie, a protester who is fighting against the building of the Shannon LNG Terminal in the Munster province of Ireland. Everyone got the message ten to fifteen years ago that gas is a transition fuel that is going to save us all but that message has never been updated. When you talk to an MP about it, they will still come out with the transition fuel thing.  

After being chilled to liquefy the gas, LNG is transported thousands of miles across the sea, resulting in additional carbon emissions which would not be produced by gas pipelines.

Another harmful element is the fracking, which can cause ominous methane leaks. A 2018 re-assessment of US methane emissions suggests that for areas where 30 per cent of gas production takes place, overall leakage rates for natural gas was 2.3 per cent (which applies to the US natural gas supply chain as a whole, not just that portion that is fracked). This figure is 60 per cent higher than under EPA inventory estimates. With a 12 year life in the atmosphere, methane is more short-lived than carbon dioxide, but approximately 100 times more potent. Methane, a chief component in natural gas, is responsible for a quarter of global warming to date and experts reckon that its potency as a global warming gas has risen*. The growth is all in fracked gas, which is looking for a market, says Nace. 

A major spending spree in LNG is around the corner; according to the 2019 report of the International Gas Union (IGU), growing emphasis on environmental regulation will boost interest in LNG.

Researchers, including Nace, have found evidence of a serious obstruction of a collision between new infrastructure investments and non-negotiable climate constraints if investors and regulators do not change course. Global LNG infrastructure expansion would be incompatible with the Intergovernmental Panel on Climate Change (IPCC) warning that, in order to limit average warming to 1.5°C above pre-industrial levels, gas use must decline 15 per cent by 2030 and 43 per cent by 2050 relative to 2020.  

Even energy experts like Stephen O’Sullivan, a senior research fellow at Oxford Institute for Energy Studies, assert that gas is a bridge fuel“[In China] if you don't believe in government statistics and if your children breathe in smog, you are starting to complain and the government is responding with more gas. 

Under the global paradigm that gas would get nations away from coal, LNG appetite around the globe has surged tremendously over the past years. While pipeline trade has also grown, LNG has surged at an even faster level and LNG trade across oceans has opened up entirely new markets for natural gas, with 22 nations with currently no LNG import capacity in the process to plan and build LNG import terminals over the coming decade, Global Energy Monitor figures show.

LNG as a share of global natural gas accounted for 5.5 per cent in 2000 and more than doubled to 11 per cent in 2018. It will double again by 2030 to 20 per cent if planned LNG projects go ahead, with overall gas allowed to grow at the level projected in International Energy Agency's (IEA) New Policies Scenario.  

Why does the UK deserve separate mention?

The UK government set itself apart from other developed nations by setting an emissions reduction target and planning to keep emissions outside the country.

The UK government’s recent demand to continue using international carbon credits was criticised by CCC, which recommended it should meet its target within its borders. The UK is likely to become Europe's top LNG importer (with additional LNG important terminals planned) and its apparently clean climate strategy may need to be reconsidered.

If extra capacity is built, it could catapult the UK to become one of the leading methane importers. Going by planned projects, the UK ranks 4th worldwide in its level of planned LNG import capacity. While not all foreign gas comes with the same methane leakage problems, the UK's appetite for gas fracked in the US is growing. Hereby all gas would come with methane leakage problems. Only in the US have these been studied extensively. Nace reckons that in other countries, where conventional extraction technology is used but with old and leaky pipelines, leakage rates could even be higher. The amount of US LNG imports to the UK have never been higher than in the first two months of 2019.

Joseph Daniel, senior energy analyst at the Climate & Energy Program at the  Union of Concerned Scientists says that a massive increase in LNG capacity is incompatible with a climate-stable world: We have limited carbon budget and burning all of the available natural gas would push us way over our limits or lock us into a future where we are dependent on carbon capture sequestration technology. Maybe the future will require carbon capture technology but building LNG terminals today locks us into that future, and prevent cleaner, possibly cheaper, alternatives, he told E&T.  

Professor Jonathan Stern, research fellow and founder of the natural gas research programme at the Oxford Institute for Energy Studies expresses doubts that in the context of an ambitious 2050 target, a sub-target relating to LNG would be significant.

More and more US gas originates from fracking show,  figures provided by the US Energy Information Administration (EIA) show. From 2004 to 2016, fracked gas went from almost 0 per cent of new production to 69 per cent while fracked gas reached now 70 per cent of all production. It is undoubtedly even higher now. There's still production from older conventional gas wells, but it's a smaller and smaller piece of the pie, says Nace.  

Some of the largest LNG exporters in 2018 were Qatar and Australia (see heatmap). LNG overseas trade between basins show that Europe receives most of its LNG from Africa (20.5MT) followed by the middle east (16.9MT), according to IHS Markit data, EIA and IGU. In 2018, the UK accounted for a relatively small buying share of US produced LNG, but US intent to ramp up export infrastructure and proposed projects in the UK could change this. 

LNG trade volume

Image credit: Ben Heubl for E&T Magazine

UK game of 'whack-a-mole' could harm investors

Nace compares UK plans to expand LNG import infrastructure to a game of Whack-a-mole: “You are knocking down one impact, but you are creating a different problem in another place. In his new report called “The New Gas Boom”, the team of researchers found that global LNG infrastructure will draw on $1.3tn new investments. With much higher levels of gas production, methane leaks are likely to grow proportionally.

Meanwhile, from an economic standpoint, significant investor risk is dawning. If costs of renewables continue to fall as projected, it could create a global glut of ‘stranded infrastructure assets', the authors project.

This could severely hit US and Canadian investors.  LNG export terminals are under development in 20 countries. Canada and the US take the lion share of 74 per cent of the proposed new capacity. If these are under construction, LNG terminals in pre-construction and construction would increase current global export capacity threefold.

More exports on one side mean more imports somewhere else. With nearly half of all countries planning on new LNG import terminals having no operating facilities, a global LNG export market is only just under development.

O’Sullivan says that "we now have a global gas market, maybe 10, 15 years ago, we didn't have that, crossing the Pacific, crossing the Atlantic. Price moves in one country have ripple effects around the world". The geopolitical implications of a global LNG market are significant: "If the US says we are putting a price on China or if China says we are putting a tariff on US gas, that means other suppliers are not far. The US will find other homes for its LNG, maybe Japan, maybe Korea, perhaps the UK. The Trump administration is no fan of Nord Stream 2", O’Sullivan told E&T.

E&T analysis of import terminal data shows that UK's capacity size of planned import terminals - accounting for 3.3 per cent of the total - is around 102 per cent higher than the average for all the countries.

A proposal on import terminal project 'Point Meridian' in the North West of the UK, foresees a capacity of 6 million tonnes per year. In global standards, this would be relatively large figure, Nace confirms. Port Meridian ranks 24 per cent above the global average of proposed or newly added facility import capacity (of 4.8 mpta) with its project size. The import terminal is due to begin construction next year with planning permission already granted.  Being the largest LNG terminal in Europe and eighth largest in the world in terms of tank capacity (totaling one million cubic meters), another large UK project is the Grain LNG Terminal in the South East of England. Already de-liquefying since 2005, its capacity of 15 million tonnes per year could be further utilised. 

The additional expected demand spurred a proposal to add another six million tonnes per year for expansion.  The cost investors will pay are considerable. These import terminals are tallied at $274 per tonne of annual capacity, according to the International Gas Union. At that cost per tonne, they will each cost $1.644 billion. These massive projects pose a risk of becoming stranded assets long before their 40-year lifespan is up, Nace explains.  Joseph Daniel, from the Union of Concerned Scientists, says it could be smartest to wait to how the cost of renewables, storage, and gas will change. "There is no need to lock a country into a future where investors will be facing billions in stranded assets or a requirement to double down and spend untold sums on carbon capture technology," he says.

Renewables and battery technology costs are falling while new strategies for integrating renewables are also being developed; this means the grid will likely become capable of integrating far more renewables than we realise, he says.  Nace stresses that the UK has been a leader in offshore wind. He thinks there is much more untapped potential for offshore wind to increase its share of generation - rather than turning to large imported LNG.

Expert advice is unambiguous: UK policymakers must cancel import terminals at once. With clean alternatives rapidly falling in cost, and the likelihood of stricter global action on climate change, locking in fossil infrastructure with a high emission profile would be out of step with the need for a rapid transition to clean energy, diverting resources from investments in low-carbon alternatives, they warn.

To redirect investment into other sectors than LNG or coals might aid employment. Secretary of State for Business, Energy and Industrial Strategy Greg Clark said that almost 400,000 people are already employed in the low-carbon sector and its supply chains across the country: "Through our modern Industrial Strategy we’re investing in clean growth to ensure we reap the rewards and create two million high-quality jobs by 2030". 

To continue the UK's global leadership is the basis for introducing a legally binding net zero target to end the UK’s contribution to global warming entirely by 2050, Clark said. "The report we commissioned from the CCC makes clear that we have laid the foundations to achieve a net zero emissions economy, and that it is necessary and feasible".

The report confirmed that presently the general public would have a "low awareness of the need to move away from natural gas heating and what the alternatives might be". CCC's scenarios that achieve a net-zero target prescribes a decline in gas consumption of 32 per cent by 2050, reaching close to 600 TWh. Britains LNG expansion plans may not support this if fully realised. Alternatively, it will be the 'stranded asset scenario as described above.

The IET's study into repurposing gas networks for hydrogen looks promising. If the reduction in gas consumption is fruitful, achieving a net-zero scenario target is likely to result in lower UK gas import dependency than in a high-carbon world, the CCC report claims. The UK also proved that it is able to put its foot down in the past.

The UK recently set a new record for its electric grid going coal-free. Those coal-free periods are going to become longer and more frequent, predicts Daniel. "[But] LNG in the UK isn’t likely to displace coal. More gas infrastructure just means more gas which is likely to crowd out cleaner resources", he says.  Calculations can already prove to investors that costs in some areas are more favorable for renewables than for both coal and gas: “Again and again, renewables have fallen in price much more quickly than expected. The latest Lazard estimates for unsubsidised levelised costs show renewables to be cheaper than both gas and coal for power generation. Moreover, both wind, solar, and battery backup all continue to show downward cost trajectory”, Nace said.

Another reason to wait is the existing lack of utilisation. Import capacity shows that UK's LNG profile is only being utilised at the very low rate of 15 per cent, according to the 2019 IGU report. Finally, if the UK and Irish governments cannot bring themselves to stop LNG import terminal building decisions for the sake of preventing environmental damage elsewhere or to protect investors from losing money in the long-run, perhaps baby dolphins might do the trick. Anne Marie, protester of Shannon LNG in Ireland says: "They literally want to build where the baby dolphins live". In 1993, the Irish Whale and Dolphin Group identified the Shannon estuary as a home to a resident group of bottlenoses dolphins, providing to them unique and extremely important habitat. 

*Note that the potency of fugitive methane has not changed, but the upward adjustment in scientific estimates of the potency

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