Carbon-neutral lng to increase costs of natural gas production, consumption.

The growing market for carbon-neutral LNG will add a price premium to LNG cargoes, thereby increasing the cost of LNG imports and consumption, with some additional costs passed on to the end-user, according to experts at the Gastech Virtual Summit this week.

The price premium, while distributed between companies in the supply chain, risks increasing the cost of LNG at a time when low natural gas prices are key to displacing competing fuels like coal and penetrating new price-sensitive markets in emerging Asia.

The estimated costs for pricing a carbon-neutral LNG can vary.

One estimate by Australia's Origin Energy showed that for a standard LNG cargo with average CO2 emissions of 304,000 tons, the "Green Premium" can indicatively be assessed at 80 cents-$1.70/MMBtu assuming an average offset/abatement cost of $10- $20/ton of CO2.

The SandP Global Platts JKM for October was assessed at $4.613/MMBtu on Sept. 9, which means that the premium for a carbon- neutral LNG cargo could be between 17 percent-37 percent of the price of an LNG cargo in the current market. At $4.613/MMBtu a full LNG cargo would cost around $15.7 million, while the same cargo could cost around $18.4 million to $21.5 million if its carbon footprint was fully offset.

"The full cost should be shared along the value chain," Mark Schubert, Origin's Executive General Manager, Integrated Gas, said. He said producers and importers will have to reduce the carbon intensity of their...