BAKU, Azerbaijan, Nov.28. Decarbonization has become a priority consideration in international gas contracts, Trend reports November 28 with reference to Oxford Institute of Energy Studies (OIES).
The OIES report reveals that since June 2019, there have been several reported deliveries of LNG cargoes accompanied by carbon offsets.
“These cargoes, initially designated as ‘carbon-neutral’ and, more recently, as ‘offset-paired’, have brought the environmental credentials of LNG deliveries to the forefront of discussion in the LNG industry. With most recent developments initially centered on spot transactions, decarbonization requirements have become increasingly relevant in the context of long-term LNG contracts. This has been reflected in various industry-driven initiatives aimed at improving the environmental performance of long-term LNG sales.”
The institute experts recall that in 2020 and 2021, precedential LNG SPAs accompanied by statements of GHG emissions were announced by Singapore-based Pavilion Energy.
“In parallel, in July 2021, Shell and PetroChina signed a 5-year contract presented to the public as ‘the world’s first contract for carbon-neutral LNG’, establishing a precedent for transposing the idea of ‘carbon-neutral’ LNG to term sales. The concept of ‘carbon-neutral’ LNG, as such, is not uncontroversial. However, there have been questions raised in the industry as to its credibility as a commercial product and legal construct. The lack of transparency in the quantification and reporting of GHG emissions is a major concern. With priorities in contract negotiations recently shifting in favor of security of supply, announcements of ‘carbon-neutral LNG SPAs’ are not expected in the near term. Nonetheless, due to significant volumes locked into long-term contracts, LNG SPAs with GHG neutrality objectives appear to be the likely next step in the industry’s response to decarbonization.”
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