Climate

Exporting Liquefied Natural Gas (LNG) Is Still Bad For The Climate — And A Very Poor Long-Term Investment

The surge in U.S. production of shale gas is creating a surge in permit requests to build liquefied natural gas (LNG) terminals. That’s because the glut of U.S. gas has dropped domestic prices sharply below global price levels.

I explained back in June why “Exporting LNG Is Bad For The Climate.” But the New York Times has just run a misleading op-ed, “The Case for Natural Gas Exports,” so the issue clearly merits a revisit.

LNG Value Chain

The NY Times piece offers this paragraph as the sole defense to the well-known charge that LNG exports are bad for the climate:

At the same time, exports would likely reduce global greenhouse gas emissions. Moreover, the small price increases that would result from allowing exports would have at most a marginal impact on the use of natural gas as fuel for cars and trucks. Blocking exports wouldn’t push natural gas into automobiles — it would mostly keep it in the ground, because there would be less incentive to extract it.

The argument about cars and trucks is a red herring (at best) since replacing gasoline with natural gas in vehicles is pretty clearly a loser from a global warming perspective — and always will be — as a major 2012 Proceedings of the National Academy of Sciences study makes clear.

It is head-scratching to say the least to claim that exports would reduce greenhouse gas (GHG) emissions when the Times acknowledges that blocking exports would leave this fossil fuel in the ground! Burning natural gas releases GHGs. We need to slash global GHGs 50% in four decades merely to have a shot at keeping total warming anywhere near 2°C (3.6°F), a point beyond which risks to human civilization multiply exponentially.

Worse, natural gas extraction is leaky, and natural gas is mostly methane, a highly potent GHG (with some one hundred times the global warming potential of carbon dioxide over a 20-year period). Most of the new natural gas in this country comes from hydraulic fracturing, which is widely thought to be leakier than conventional gas extraction.

Worst of all, cooling natural gas to about −162°C (−260°F) and shipping it overseas for use in distant countries is costly and energy-intensive:

The process to bring the gas to such low temperatures requires highly capital intensive infrastructure. Liquefaction plants, specially designed ships fitted with cryogenic cooling tanks, regasification terminals and domestic transmission infrastructure all make LNG relatively expensive in construction and operational cost.

When you factor in the energy and emissions from this entire process, including shipping, you get a total life-cycle energy penalty of 20% or more. The extra greenhouse gas emissions can equal 30% or more of combustion emissions, according to a pretty definitive 2009 Reference Report by the Joint Research Centre of the European Commission, Liquefied Natural Gas for Europe – Some Important Issues for Consideration.

The NY Times piece actually makes this odd argument on behalf of LNG exports: “It will take years before any export terminals are up and running — in the meantime, producers and regulators should strengthen safeguards so that gas is extracted safely.”

But this is yet another reason why LNG exports make no sense. Why would we want to start massive exports of natural gas around the end of this decade, with costly new infrastructure that lasts until mid-century?

If avoiding catastrophic climate change is your goal, then spending huge sums on even conventional natural gas infrastructure is clearly not the answer, as a recent International Energy Agency report made clear:

The specific emissions from a gas-fired power plant will be higher than average global CO2 intensity in electricity generation by 2025, raising questions around the long-term viability of some gas infrastructure investment if climate change objectives are to be met.

Duh! Or is that D’oh?

And as we’ve seen, LNG shipped from the U.S. is much worse from a GHG perspective than regular gas, so by the time a lot of new LNG terminals are up and running in this country, it seems likely that LNG-fired plants overseas will be have a higher GHG intensity than the average plant in the electric generation system needed to be anywhere near a non-catastrophic emissions path.

We do not want to build a global energy system around natural gas (see IEA’s “Golden Age of Gas Scenario” Leads to More Than 6°F Warming and Out-of-Control Climate Change). At the time, the UK Guardian‘s story put it well:

At such a level, global warming could run out of control, deserts would take over in southern Africa, Australia and the western US, and sea level rises could engulf small island states.

The extra emissions from LNG all but eliminate whatever small, short-term benefit there might be of building billion-dollar export terminals and other LNG infrastructure, which in any case will last many decades, long after a sustainable electric grid will not benefit one jot from replacing coal with gas.

Asserting any net benefit requires assuming the new gas replaces only coal — and isn’t used for, say, natural gas vehicles, which, as noted, are worse for the climate or that it doesn’t replace new renewables.  If even a modest fraction of the imported LNG displaces renewables, it renders the entire expenditure for LNG counterproductive from day one.

Remember, a major 2012 study on “technology warming potentials” (TWPs) found that a big switch from coal to gas would only reduce TWP by about 25% over the first three decades (see “Natural Gas Is A Bridge To Nowhere Absent A Carbon Price AND Strong Standards To Reduce Methane Leakage“). And that is based on “EPA’s latest estimate of the amount of CH4 released because of leaks and venting in the natural gas network between production wells and the local distribution network” of 2.4%. Many experts believe the leakage rate is higher than 2.4%, particularly for shale gas. Also, recent air sampling by NOAA over Colorado found 4% methane leakage, more than double industry claims.

A different 2012 study by climatologist Ken Caldeira and tech guru Nathan Myhrvold finds basically no benefit in the switch whatsoever — see You Can’t Slow Projected Warming With Gas, You Need ‘Rapid and Massive Deployment’ of Zero-Carbon Power. That study takes into account the near-term impact of the construction of new infrastructure.

BOTTOM LINE: Investing billions of dollars in new shale gas infrastructure for domestic use is, at best, of limited value for a short period of time if we put in place both a CO2 price and regulations to minimize methane leakage. Exporting gas vitiates even that limited value and so investing billions in LNG infrastructure is, at best, a waste of resources better utilized for deploying truly low-carbon energy. At worst, it helps accelerates the world past the 2°C (3.6°F) warming threshold into Terra incognita — a planet of amplifying feedbacks and multiple simultaneous catastrophic impacts.

 

12 Responses to Exporting Liquefied Natural Gas (LNG) Is Still Bad For The Climate — And A Very Poor Long-Term Investment

  1. Thanks, Joe! Stay on the case!

  2. Simply put, GHG emissions can’t be reduced by expanding fossil fuel production.

    If NG were truly displacing other, more GHG-intensive fossil fuels, expansion might be good policy (if there were also some kind of counterforce to sunset that expansion as overall GHG reduction goals incrementally took effect). But it’s not working out that way.

    The coal displaced by NG for electric generation is largely being shipped overseas. Oil isn’t being displaced by NG. Domestic oil consumption has declined because of the bad economy. Domestic oil production has upticked a bit due to the same drilling technology that has increased NG production. Ironically, a lot of the NG to be exported is associated with that oil production.

    I had hoped NG could play a role in GHG reductions. But it’s become clear that, left mainly to market forces, NG production growth is simply piling into the mix and is a net adder to overall GHG emissions. Exports only compound that problem.

  3. Stan says:

    You forgot to mention how Obama approved 2 LNG export facilities (one in the gulf) in order to boost short term employment goals. Think progress, or think politics even if the environment gets in the way.

  4. Paul Klinkman says:

    “You Need ‘Rapid and Massive Deployment’ of Zero-Carbon Power.”

    No, we need rapid and massive reinvention and proving of Zero-Carbon and CO2-eating power. The business of deployment is going to take huge resources. The more we reinvent and prototype, the cheaper our worldwide deployment gets and the more our inventions penetrate every corner of the world.

    Otherwise it’s a good article. Thanks.

  5. Ken Barrows says:

    One view out there is the NG producers are selling for below the cost of production. If so, international buyers may have to pay a pretty penny for NG. With the energy requirements to export the stuff, those buyers may not want to pay what is required to ensure NG producers make a profit.

  6. NG producers are not selling below cost as a strategy, if that’s what you’re saying. The market price is below the cost of production for some because production is so high–about 30% higher than it was just five years ago. Those producers caught in that trap are trying to ride it out. Which means they have to produce more just to generate the same cash flow. So it’s a bit of a vicious cycle.

    One of the things that’s simultaneously hurting and helping is the gas that’s being produced incidentally with the oil. They make $$ on the oil, and lose (much, much less) on the gas.

    The desire to export is precisely to stabilize gas prices at a level that is profitable for most gas production facilities.

    Overseas prices of NG are multiples higher of US prices. Europe is around 4X of the US price right now; Asia is around 6X. US producers can make a very good profit from exports well within this range, even accounting for liquefaction and transportation. That’s the big reason they want to do it–the spreads are huge.

  7. Sasparilla says:

    Very well said Raymond and I might add – this is why big money is, and will, make LNG exports happen – there’s just too much easy money to be made.

    In the long run this will also raise domestic prices, once enough export capacity comes online, up to international prices – a double win for the natural gas industry as those international prices are stratospheric compared to current US domestic prices.

  8. Richard Miller says:

    The Times article is by Micheal Levi and it is pretty typical Levi. He wrote in the Times that the Keystone Pipeline should be approved and that Hansen’s argument regarding the importance of stopping Keystone XL was offbase.

    He clearly does not understand the scale of the planet saving challenge.

  9. Mulga Mumblebrain says:

    That will hurt the peasants in the USA, where the median income, adjusted for inflation, is less than it was forty years ago.

  10. Mulga Mumblebrain says:

    He probably loves money more that anything else. There’s a lot of that type around, in business, politics and the MSM.

  11. Actually, I’ve looked at this very closely, and I don’t think LNG exports will raise domestic prices much, unless we have a sudden drop in production. There is a lot of gas out there. Just look at the EIA shale map. I do think the strategy of stabilizing prices in a $5.00-$7.00 area is plausible, from a business perspective. Which is really a problem for renewables.