Russian LNG and Equipment Still Inadequately Sanctioned as EU-Bought LNG Funds Ukraine War

 

     In early November, the US State Department announced sanctions on a new Russian development known as Arctic LNG 2. This is meant to block European and Asian countries from purchasing the LNG when the project comes online in 2024. European gas storage is full before winter and if the winter is mild storage will remain adequate to prepare for the 2024-2025 winter. This is the first time Russian LNG has been sanctioned. Sanctions have had to be balanced with keeping supply on the global market to keep prices from rising. Russia benefits from selling gas but can also benefit by selling less gas if prices are inflated as they did in 2022. While the new project was expected to loosen the tight LNG market and aid lower pricing, the new sanctions will attempt to keep it off the market as much as possible. While the sanctions go into effect in January 2024, there will likely be some exemptions for Western-aligned investors as there has been for Japan being allowed to purchase gas from the Sakhalin 2 project above the price cap. France’s TotalEnergies is invested in the Arctic LNG 2 project. Thus far, Russia’s other LNG projects, Yamal LNG and Sakhalin 2, which are shipping the fuel to Europe and Asia, have not been sanctioned.

     The world’s largest floating structure, a 640,000-ton platform, will host the Arctic LNG 2 plant along the Gydan Peninsula in the Siberian Arctic. This project had investors from Japan, China, and France (TotalEnergies has a 21.6% stake) and utilizes Western technology and parts from Italy, Germany, the U.S., the U.K., and elsewhere. This equipment has been delivered throughout the Russia-Ukraine war even after the EU announced its ban on the export of LNG industry hardware to Russia, and right up until the deadline for sanctions coming into force. $400 million in European equipment was delivered. The EU has yet to sanction Russian LNG directly. Putin has long looked to the distance advantage of transporting gas via the northern route to Asia. The Kremlin's goal is to export 100 million metric tons by 2030. This will help fund the Russian war machine beginning in 2024. Russia’s Novatek also has plans to turn gas that would have otherwise been pipelined to Europe into LNG and sell it for a higher price. The article in Foreign Policy puts forth the following argument about what would be required to stop Putin and company from developing these projects to fund war efforts:

 

“This makes it all the more urgent that the EU target Russia’s strategic energy projects in its next round of sanctions. The EU should follow Washington’s lead by designating entities directly responsible for building and operating Arctic LNG 2 and other gas projects. Europe can and should also go further by broadening the list of items banned for export to Russia. This will help stop the development of new upstream gas projects and hinder Putin’s ability to build infrastructure along the Northern Sea Route. At a minimum, EU member states should ban the transshipment and reexport of Russian LNG in their ports.”

 

The Kremlin will do what they can to keep making money from their exports. They will also continue to evade sanctions any way they can and pretend that they are a fair member of the world economic community. The U.S. plans to utilize anti-corruption laws to target sanctions evasions that the Russians have enacted through offering engineering contracts to opaque companies. Enforcement of the Corporate Transparency Act is one vehicle the U.S. is expected to use.

 

     Of course, LNG has a higher carbon footprint than pipelined gas. The Western world is willing to tolerate that by buying LNG from other countries to replace Russian pipeline gas but the status quo of buying higher emissions Russian LNG at higher costs to replace cheaper lower emissions of Russian pipeline gas helps Russia and hurts the climate change effort. This is obviously not a sustainable solution to the problem.

 

      Thus far this year EU countries have purchased 6.1 billion euros (around $6.6 billion) of LNG from Russia. Russian LNG sales to the EU rose by 40% over 2021 purchases. China is the biggest buyer. In the EU, Spain and France have been the biggest buyers, followed by Belgium. Even Estonia and Lithuania are buying some Russian LNG. Clearly, they would rather not be in a position where they feel they need to buy it. These increased sales no doubt is a factor in Russia raising its military budget. Banning Russian imports is left up to individual EU countries. The UK banned all Russian imports in December 2022. The EU plans to ban all Russian gas imports by 2027 but in the meantime, it is helping to keep the Kremlin’s war machine turning. Spain cites fear of energy shortages as a reason for buying more Russian LNG. The availability of ships with Russian LNG in their ports was also a factor for some countries buying more. Belgian ports are mainly LNG hubs for other countries like Germany and France.

 

 

LNG More Carbon Intensive Than Coal? Not Likely at All According to Most Unbiased Analysis

 

     Meanwhile, activist Cornell scientist is at it again claiming in a new study that life-cycle LNG greenhouse gas emissions are between 24% and 274% higher than comparable coal emissions. He is using short-time frame emissions calculations (20-year for methane vs. 100-year for CO2) and vastly exaggerated fugitive emissions. It is true that LNG emissions vary by source of the LNG. This is because natural gas often contains CO2 in varying amounts. The CO2 is vented before liquifying the gas into LNG. In the case of pipelined gas, the CO2 is vented during the combustion process. The story was carried by RT. I found it curious that the following quote from the study was emphasized: “In all of the scenarios considered, across all types of tankers used to transport LNG, methane emissions exceed emissions of carbon dioxide from the final combustion of LNG.” Since, as I have noted, CO2 is vented before shipping, then it would stand to reason that the CO2 from final combustion would be lower. Of course, the quote is just saying that fugitive methane emissions are higher than combustion emissions. Other studies have not validated this claim. Studies in 2015 and 2017 noted that LNG life cycle emissions are 62% (so 38% less than) of a modern coal plant and only about 33% of an average coal plant at that time.

     I wrote a blog post in June 2017 - Life Cycle CO2 Emissions: Pipeline Gas vs. LNG and the Climate Benefits of LNG Relative to Coal that examined the comparisons. The Pace Global report available from the Centre for Liquefied Natural Gas from 2015 concluded that the highest emitting LNG scenario emits about half of the GHGs of the lowest emitting coal life cycle emissions. The paper is still undergoing peer review but as the graph below shows his base case is that natural gas and coal have equivalent GHG emissions. We know that is not true. Only by claiming the fugitive gas emissions are much higher than most other studies indicate can he utilize that assumption. Natural gas combustion emissions are less than 50% of coal combustion emissions. While fugitive methane emissions add to that total, they also add to coal’s total since coal also has significant fugitive methane emissions. Most studies don’t see the fugitive emissions from pipelined natural gas adding more than 5-10% to the life cycle emissions of that pipelined gas, while he has them equal to coal as shown below. If you start out with an incorrect assumption, of course, you can get much higher numbers. Thus, by using that incorrect assumption and using only the short-time frame for methane the numbers can seem higher than they really are. Using the different timeframes means the extra methane emissions will be gone from the atmosphere five times faster (20 years) than the CO2 from coal (100 years). It is not an apples-to-apples comparison. To summarize: there are two misleading factors: fugitive methane emissions from natural gas systems are likely overestimated significantly and different timeframes only provide accuracy in a short timeframe. LNG greenhouse gas emissions before 2003 are mostly gone from the atmosphere but coal emissions from 2003 still pack over 80% of their greenhouse gas effect.

 

 

 

Source: Presumably from Howarth's paper from the article: Study: GHG emissions from burning LNG higher than from coal. Dieselnet.com. The New Yorker. Die Welt. November 13, 2023

 

References:

The West Paid for Putin’s HugeNew Gas Project. Zoe Relter. Foreign Policy. October 20, 2023. Despite Sanctions, the West Paid for Putin’s Huge New Arctic LNG Project (foreignpolicy.com)

EU Gas Transactions Fund Putin’s War Efforts with Billions. Ben Evans. Z-Live News. November 18, 2023. EU Gas Transactions Fund Putin’s War Efforts with Billions (msn.com)

US seeks to thwart Russia’s ambition to become a major LNG exporter. Shotaro Tani and Ian Johnston in London and James Politi in Washington. Financial Times. November 12, 2023. US seeks to thwart Russia’s ambition to become a major LNG exporter (ft.com)

LNG worse for climate than coal – study. RT.com. November 14, 2023. LNG worse for climate than coal - study (bignewsnetwork.com)

EU’s thirst for fuel hands Putin £5bn windfall. Joe Barnes. The Telegraph. November 18, 2023. EU’s thirst for fuel hands Putin £5bn windfall (msn.com)

Study: GHG emissions from burning LNG higher than from coal. Dieselnet.com. The New Yorker. Die Welt. November 13, 2023.  news: Study: GHG emissions from burning LNG higher than from coal (dieselnet.com)

Life Cycle CO2 Emissions: Pipeline Gas vs. LNG and the Climate Benefits of LNG Relative to Coal. Kent C. Stewart. Blue Dragon Energy Blog. June 27, 2017. Blue Dragon Energy Blog: Life Cycle CO2 Emissions: Pipeline Gas vs. LNG and the Climate Benefits of LNG Relative to Coal