Gas industry in damage control as landmark study finds LNG ‘worse than coal’ for the climate

In January this year, seemingly out of nowhere, US President Joe Biden made a decision that sent shock waves through the trillion-dollar global gas industry.

With the stroke of a pen, Mr Biden put a pause on approvals for any new project looking to ship super-chilled liquefied natural gas — or LNG — from US shores.

It was a decision that left many in the industry floored.

After all, within just a few short years America had rocketed from a position of having no LNG industry to being one of the world’s biggest exporters of the fuel alongside Australia and Qatar.

And it was a decision that has set off a political firestorm in the US, where energy and America’s insatiable needs for it are looming, as ever, as a critical issue in an election year.

Underlying that decision, however, was a landmark report that has cast fresh doubt over the supposed environmental benefits of gas compared with coal.

Gas emissions ‘worse than coal’

It’s a study that has raised fresh questions over the role of gas as a bridge to a renewable energy future.

The peer-reviewed study by Robert Howarth, a professor at Cornell University, found American LNG, at least, was worse than coal when it came to emissions.

Specifically, the report found greenhouse gas emissions from LNG were 33 per cent greater than those related to coal when measured over a 20-year timeline.

And at the heart of Professor Howarth’s finding was not carbon but, rather, methane, a far more potent greenhouse gas.

“Even though carbon dioxide emissions are greater from burning coal than from burning natural gas, methane emissions can more than offset this difference,” Professor Howarth wrote in the paper.

“As a greenhouse gas, methane is more than 80 times more powerful than carbon dioxide when considered over a 20‐year period and so even small methane emissions can have a large climate impact.”

According to Professor Howarth, at every point along the chain of gas production methane was found to be leaking.

From extraction of gas at the well to liquefying it through chilling; from the transport on specially designed ships to its regasification and distribution in pipes when unloaded — in each step methane escaped into the atmosphere.

It was particularly pronounced in the US, where he noted that most of the LNG came from fracking, a process in which huge volumes of water are pumped underground to fracture rock containing the gas.

As a result, Professor Howarth estimated as much as five per cent of the gas for an LNG project in the US was lost as leaked methane.

So significant was the heating potential of methane, Professor Howarth said, the gas may have added “0.5°C of the total global warming to date since the late 1800s”.

By comparison, he said warming directly associated with carbon was 0.75°C.

“The rate of global warming over the next few decades is critical, with the rate of warming important in the context of potential tipping points in the climate system,” he wrote.

“Reducing methane emissions rapidly is increasingly viewed as critical to reaching climate targets.

“Increasingly, leaders on global climate policy are calling for a rapid move away from all fossil fuels, including natural gas and not just coal.

US gas exports skyrocket

The report from Professor Howarth — and the decision by President Biden to pause LNG project approvals — comes after a period of extraordinary growth for the industry.

In response to pleas from its European allies, who were caught horribly short when Moscow’s full-scale invasion of Ukraine exposed their dependence on piped Russian gas supplies, the US rode to the rescue with LNG exports.

From virtually a standing position in 2016, when Washington overturned a longtime ban on gas exports, the US has risen to become, at various times recently, the world’s biggest exporter of the commodity.

The rapid ascent had delivered not only America’s prestige as a dominant energy exporter, but outsize returns for US gas investors.

Demand has been driven not only by industries from manufacturing to minerals processing that need gas as a feedstock but also by the growing use of the fuel for electricity generation.

When burned for power, natural gas produces about half as much carbon dioxide as coal.

The relative cleanliness of gas as a source of power has helped drive the huge investments in LNG projects.

Those investments have ranged across the globe from Qatar, the traditional heavyweight in the industry, to Australia, where $300 billion was spent on new projects last decade, to the US more recently.

In turn, customers across North Asian powerhouses Japan, China and South Korea as well as Europe have eagerly bought up the supplies, using the gas among other purposes to cut their reliance on dirty coal-fired power.

Uproar in the gas industry

Given the dependence of so many countries on imported LNG, oil and gas bosses have lashed the White House’s move to hit the pause button on new exports.

Last month, the boss of US energy behemoth Chevron attacked the decision in a broader swipe at the Biden administration’s policies.

Chevron chief Mike Wirth said the administration’s policies were “undermining energy security” and putting “politics over progress”.

What’s more, he claimed they would slow the transition away from coal by reducing the supply of natural gas and, in doing so, push up emissions.

“When it comes to advancing economic prosperity, energy security and environmental protection, an LNG permitting pause fails on all three,” Mr Wirth told attendees to the Gastech conference in Texas.

For their part, Australia’s gas producers have questioned the credibility of Professor Howarth’s paper, saying it is riddled with errors.

Samantha McCulloch, the head of lobby group Australian Energy Producers, said in the first instance the study “significantly overestimates emissions from US gas production”.

At the same time, Ms McCulloch said it underestimated how many emissions were caused by the use of production and use of coal.

“For example, the paper uses methane emissions figures for US gas production that are three times higher than those from the International Energy Agency,” Ms McCulloch said.

Equally, Ms McCulloch said the Australian LNG industry caused fewer emissions than its US equivalent.

While much of America’s industry used fracking to extract the gas, Australia’s was largely based on conventional drilling techniques on offshore wells.

Ms McCulloch said Australia’s industry was “globally recognised as one of the best-performing” for the intensity of methane emissions and it was exploring ways to reduce them further.

“LNG plays a critical and growing role in supporting energy security and emissions reductions in our region,” she said.

“Australia is the largest supplier of LNG to Asia and the methane intensity of Australian gas is among the lowest in the world — and three times lower than the US, according to the IEA.

“Australia’s proximity to LNG demand in Asia also reduces emissions associated with transport.”

Emissions ‘under-reported’

But environmentalists are sceptical of such arguments.

Kevin Morrison from the Institute of Energy Economics and Financial Analysis said the industry was flattering itself to think its emissions were as low as it claimed.

Mr Morrison, who covers the Australian gas industry for IEEFA, said many of the published numbers supposedly showing how many emissions the gas industry produced were based on self-reporting.

As a consequence, he said the industry had every incentive to downplay how significant its emissions really were.

And while he said Professor Howarth’s findings were something of an outlier compared with other estimates, the study was broadly correct.

He said gas could not be considered a bridge to help wean the world off other fossil fuels.

“Gas is portraying itself as a bridging fuel but it’s expensive, it’s subject to volatility,” Mr Morrison said.

“And for both the coal and gas sector here in Australia, their emissions are under-reported.

“I think they’re both massively under-reporting.”

Outside of Australia, the Howarth study has triggered a fierce debate about the role gas should play in the energy transition.

For his part, Canadian chemical engineer and energy expert Paul Martin offered a nuanced view.

In a note he recently republished to his social media followers, Mr Martin argued gas needed to be compared with coal on broader grounds than those related purely to emissions.

Mr Martin said that unlike gas, burning coal for electricity produces “devastating pollution” as the particulates and heavy metals such as mercury and sulphur it releases can kill.

Similarly, he said it was true that, on a like-for-like basis, burning gas for electricity produced about half as much carbon as coal.

What’s more, Mr Martin said some of the assumptions made by Professor Howarth were open to debate, such as his estimate that 2.5 per cent of LNG leaked as methane from the pipes and distribution networks of gas companies.

“Howarth’s figure is based on an average for the gas industry, including antiquated cast iron gas distribution systems in east coast US cities,” Mr Martin wrote.

“Power plant gas losses are going to be quite a bit lower than 2.5 per cent, and that’s half the total leakage right there.”

Putting a price on emissions

However, Mr Martin said gas could only be considered a better fuel for reducing global warming if the leakage of methane was ignored.

Similarly, he said such generous views rested on optimistic assumptions about the warming effect of methane.

While methane lost much of its potency when measured over a 100-year time-frame, he said it was 86 times’ more potent than carbon over a 20-year horizon — a time when action to reduce global warming would be most pressing.

He said the best course of action was to pursue energy efficiency and reduce waste as well as attaching a carbon tax on all emissions, including methane and CO2.

“So we stop treating our atmosphere like a free and limitless public sewer and encouraging the combustion of fossils as a result,” he said.

“Doing that will force the natural gas industry to get very, very serious about leakage, very quickly.

“Significant and sustained fossil carbon taxes will hasten the transition to renewable electricity generation… and possibly nuclear generation too, which is already underway.

“Coal needs to stay in the ground — that is the cheapest and most effective way to permanently sequester fossil carbon that exists.

“Coal needs to be the first fossil fuel out.”