ADNOC’s liquefied natural gas (LNG) opportunity

The UAE state energy firm has embraced natural gas as an energy transition opportunity. It is also taking meaningful steps to minimize the carbon intensity of its planned LNG project. The next question is: may it also use some of its fairly unique position to set a high global standard on methane intensity, and may COP28 be the ideal platform to launch such an ambition? 

Liquefied natural gas (LNG) on the rise 

Last January, ADNOC CEO Sultan Al Jaber announced the creation of ADNOC Gas, integrating the company’s gas processing, operations, and marketing activities, and listing a minority stake on the stock exchange. The message was clear: natural gas is a critical fuel in the energy transition, and the emirate is well positioned to meet domestic, and international demand for the fuel. Alongside the integration, ADNOC also announced the planned investment in a 9.6 million tonnes per annum (MTPA) LNG export facility in Ruwais, to complement the existing 6 MTPA at Das Island. 

Greenhouse gas emissions reductions firmly on the agenda

Simultaneously, ADNOC is committed to reaching net zero scope 1 and 2 emissions by 2050, or sooner, in line with the UAE’s Net Zero by 2050 Strategic Initiative. Even though it is important to note that the bulk of GHG emissions in the O&G sector is in scope 3 (end use), this is an important first step for a major producer like ADNOC. As part of these plans, the announced 9.6 MTPA investment will have electric powered processing facilities which run on renewable and nuclear electricity. The company also plans to be a front runner when it comes to its methane emissions with an upstream methane intensity target of 0.15% by 2025 announced in 2022, a step ahead of OGCI’s collective 0.25% target, but not as low as Equinor’s 0.02%. 

The missing piece in the bridge fuel argument

Fugitive methane emissions are a subject that has received growing scientific attention in recent years and is consequently facing more and more regulatory scrutiny as well, in particular in North America and the European Union. Starting in 2018, a number of authoritative scientific contributions have suggested that fugitive methane emissions in O&G production, processing and transportation/storage, can be significantly higher than historically reported (in jurisdictions where reporting was necessary). This is problematic because methane is a potent greenhouse gas and a significant contributor to global warming. In November 2021, 100 countries, including the UAE, signed the Global Methane Pledge, announced by the US and EU policymakers, aiming at reducing methane emissions by 30% by 2030. 

Our understanding of fugitive methane emissions, though improving, continues to be relatively poor because regulatory schemes (e.g. in the EU and US) are still in the design phase, operators may lack clear incentives to improve their understanding of their environmental footprint, nascent technologies to help detect fugitive methane emissions such as continuous monitoring, satellite imaging and aircraft with infrared cameras are still improving, and company structures (through joint ventures for instance) may further blur the responsibility for better measurement, and subsequent transparency. Still, slowly but surely, the contours of regulatory regimes, in particular in North America and the European Union, are becoming clear: at a high level, policymakers are searching for better data, more transparency, and ways to give cleaner producers preferential treatment over those that have a less convincing methane profile. The ambitions of the European Union through its methane strategy is to improve data on methane emissions on imported fossil fuels, aiming at incentivizing producers to reduce them. Even though ADNOC usually exports its LNG to Asia, they exported a commissioning cargo to Germany’s new LNG terminal in Brunsbüttel in January 2023. 

Will ADNOC take a leadership role?

This process will take a number of years to crystallize but presents a company like ADNOC Gas with an enormous opportunity. Unlike many of its peers in upstream and midstream in other parts of the world, the company has relatively clustered activities that are well integrated within one company. In theory, having independent third parties use state of the art technology to measure fugitive methane emissions from its operations should be relatively straightforward, and low-cost. In turn, ADNOC Gas could use these data to further boost its own methane emissions reduction pathway below the announced 0.15%, provide publicly available, transparent and third-party certified data, set an even lower target for Ruwais LNG and thus set a global standard for natural gas producers and shippers elsewhere to follow. It could build on policy initiatives like the Global Methane Pledge and industry initiatives like the Oil and Gas Methane Partnership, and show what operationalization of these ambitions can look like in real life. Then, what better platform to launch such a climate leadership initiative than the COP28 gathering later this year?

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