'Problem in waiting': why natural gas will wipe out Australia's emissions gains

Extract from The Guardian

A looming crisis

Environment

LNG is often touted as a good alternative to coal but the increase in production means increased emissions that will cancel out any recent savings

Adam Morton

@adamlmorton

Tue 13 Nov 2018 04.00 AEDT Last modified on Tue 13 Nov 2018 04.02 AEDT

The Chevron LNG project on Barrow Island, Western Australia during its construction in 2016. Photograph: Ray Strange/AAP

Australia’s carbon footprint has expanded for the last three years straight – and the coal industry is not to blame. The biggest driver has been liquefied natural gas, known as LNG.
Science and policy institute Climate Analytics found that between 2015 and 2020 the emissions growth from LNG will effectively wipe out the carbon pollution avoided through the 23% renewable energy target.
It leaves those watching the industry wondering why it is all but absent from national debates about climate policy – and just how long that can continue.
“It’s been incredible that until now this industry has gotten away with being such a massive source of carbon dioxide – and particularly carbon dioxide growth – while barely being acknowledged,” says Piers Verstegen, the director of the Conservation Council of Western Australia.

By any measure, LNG is booming. As projects have come online in Queensland, Western Australia and the Northern Territory, production has tripled since 2012 and doubled in the two years to 2017. It is expected to expand another 18% this year as Australia closes on Qatar for the title of world’s largest LNG producer (though the US is expected to pass them both next decade).

The government’s most recent Resources and Energy Quarterly report forecast the value of Australian LNG exports would increase from $31bn in 2017–18 to $48bn in 2019–20. It is already greater than earnings from thermal coal exports.

Mass fossil fuel development has a side effect: heat-trapping gas. From a low base, LNG production – counting both fugitive emissions from the well during gas extraction and industrial emissions during processing – now contributes about 5% of national carbon dioxide emissions. That is expected to reach about 7% by 2020 and could hit 17% if all proposals under consideration are fully developed.
LNG projects last year emitted roughly the same amount as 8m cars on Australian roads. That’s more than half (56%) of the national fleet. And by 2020, it could be closer to 12m cars, or 86%.
Bill Hare, the managing director of Climate Analytics and an adviser to developing countries at United Nations climate negotiations, led an analysis of the WA gas industry earlier this year. He believes the failure to consider the rapid rise in LNG emissions is a problem-in-waiting domestically and internationally.
“This industry is now responsible for what is a globally significant increase in emissions,” Hare says. “There will be implications for it under Australia’s commitment to the Paris agreement and there needs to be a plan to deal with that.”

What is LNG and why has it grown so rapidly?

LNG is natural gas compressed into liquid form so it can be easily and safely shipped. Once it reaches its destination, usually Japan or China, it is decompressed and either burned in power plants or used in industrial processes.

The industry says this makes good environmental sense. Gas-fired electricity emits about 50% less carbon dioxide than coal. The Australian Petroleum Production and Exploration Association argues this makes it a good substitute, particularly in Asia, where it can drive economic development and cut emissions. The association points to International Energy Agency (IEA) projections suggesting demand for natural gas will grow.
But some analysts say evidence that gas is being substituted for coal is mixed at best, and the argument does not hold when it is substituted for emissions-free nuclear power or preferred to renewable energy. They say cleaner alternatives are becoming cheaper more rapidly than the IEA has forecast.
Demand for LNG spiked after the 2011 Fukushima disaster shut down Japan’s nuclear industry, wiping out nearly a third of its generation capacity. Chinese demand was steadily growing about the same time. As global gas prices spiked, there was significant investment in the US and, for the first time, on Australia’s east coast. Three LNG plants at Gladstone started operating from 2014. Two Chevron-led projects in WA, Gorgon and Wheatstone, followed in 2016 and 2017 respectively.

The creation of an export gas industry in Queensland had well-publicised ramifications for Australian households and businesses. As more than two-thirds of gas produced on the east coast was exported, domestic gas prices increase at least fourfold, pushing up already skyrocketing electricity prices. Political leaders scrambled to ensure an ongoing domestic supply. The country is now considering plans – much ridiculed in some quarters – to build LNG import terminals in southern states to replace the gas that Australia is selling offshore.

While there was much discussion about gas, the emissions from the industry remained largely unmentioned. While it is true that gas burns cleaner than coal and is expected to have a longer life if the world acts on climate change as promised, LNG production is an emissions-intensive game. Carbon dioxide is emitted when gas is extracted from the reservoir and particularly during compression and decompression. The process also requires plenty of electricity.

Bruce Robertson, an analyst with the Institute for Energy Economics and Financial analysis, says the LNG industry is the sole reason the amount of grid electricity used – affected by improving efficiency, manufacturing decline and the rise of solar panels – did not fall last year. “They are massive numbers. On the east coast, LNG is 25% of domestic gas usage and 3% of all electricity consumption,” he says.

Several potential solutions have been raised, but few have been realised.
From an emissions perspective, Australia’s most contentious LNG plant has been Gorgon, based on Barrow Island about 60km from the WA coast and co-owned by Chevron, ExxonMobil and Shell. Billed as the largest resource project in Australia’s history, it includes three processing facilities (known as trains), a plant that processes gas for domestic use and pipes connecting the island to two offshore gas fields.
It also includes a promise to limit emissions through the world’s largest commercial carbon injection project. Under an agreement with the WA government, the project is expected to capture and store 80% of its reservoir emissions – but not those from processing – over a five-year rolling average. The plan is to bury them in a reservoir 2km beneath Barrow Island.
Nearly two years on from the initial LNG shipment from the plant and nothing has been buried. The equivalent of about 1% of annual national emissions has instead gone to the atmosphere. Chevron says technical problems with the injection and storage system discovered during commissioning are being addressed. It says it is confident the system will be operational early next year.
The problems with the carbon storage development coincided with Chevron fighting suggestions it should have to pay to offset emissions from its other major WA LNG project, Wheatstone.
The company was initially expected to offset 1.2m tonnes of emissions a year, but the requirement was dropped by the Barnett Liberal state government when a national carbon price was introduced in 2011. With the carbon scheme now long abolished, the McGowan Labor government has asked the state environment protection authority to advise on whether the offset condition should be reinstated.
The company strongly opposes any change, arguing a national greenhouse reporting system introduced in 2007 should be the “single and consistent” policy to manage emissions. That system does not require emissions reductions.
A Chevron spokeswoman says policy should be focused on maintaining Australia’s international competitiveness and increasing the supply of natural gas locally and internationally “to help realise the objective of low-cost solutions for reducing greenhouse gas emissions”.
With carbon capture and storage still unproven, most of the discussion of how to deal with LNG emissions has focussed on offsets. Commonwealth officials proposed that Shell’s Prelude floating LNG project, currently under development, should not be allowed to result in a net increase in emissions but the condition was not enforced.
A Northern Territory inquiry into fracking went further, recommending companies should have to offset all emissions related to its operation, including those from when it was burned overseas. But to date, these are largely theoretical discussions.
Tony Wood, the director of the Grattan Institute energy program, says they are unlikely to stay this way. “It is a sleeper issue,” he says. “The industry has been fortunate in the sense that no one has been paying attention to it, but the tonnes [of carbon dioxide] involved with it are significant. At some point, whoever wins the next election is going to have to grapple with it.”
Woodside is looking at another potential way ahead. Its chief executive, Peter Coleman, earlier this year said the company planned to spend hundreds of millions of dollars on a combination of solar, batteries and gas to run its Karratha gas plant, reasoning 70% of its emissions came from power generation. He told reporters: “If you can start changing that out to far more efficient power generation then it’s got huge environmental benefits for us, as well as economic benefits.”
Verstegen, of the WA Conservation Council, says this shift echoes polling suggesting the public is no longer persuaded that gas is a low-emissions solution. “People are much more accepting of renewables than they were five years ago,” he says.

“They are starting to see gas as a fossil fuel alongside coal. But federal and state politicians haven’t kept up with that.”