Anglo-Dutch supermajor Shell and state-run PetroChina have signed, what they claim to be, the world’s first term contract for carbon-neutral liquefied natural gas.

Shell confirmed this week it had signed a five-year deal to supply PetroChina with carbon-neutral LNG, with the pair agreeing to cooperate to offset life-cycle carbon dioxide equivalent emissions generated across the LNG value chain for each cargo delivered under the agreement.

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It is not known exactly how many carbon-neutral LNG cargoes will be shipped under the deal, with Shell declining to disclose the figure when contacted by Upstream.

Shell has previously stated that a single 70,000-tonne LNG cargo is estimated to emit roughly 240,000 tonnes of CO2 equivalent across the value chain, on average.

It is understood this figure can vary depending on a number of factors such as the source of the LNG, the type of liquefaction technology used and the vessel used to transport the cargo.

Nature based offsets

Shell stated the carbon offsets for the cargoes under the agreement with PetroChina would come from “high quality” carbon credits generated from nature-based projects, with each credit subject to a third-party verification process and representing the avoidance or removal of 1 tonne of CO2e

Nature-based carbon offsets have drawn criticism from some quarters, especially given that many offsets are calculated from emissions estimates, rather than real-time data.

Shell said the term deal with PetroChina would allow the latter to provide carbon-neutral gas to Chinese businesses and households in line with China’s 2060 carbon-neutrality aspirations.

“Since delivering the world’s first carbon-neutral LNG cargoes in 2019, we have collaborated with producers and buyers across the globe for 13 other carbon-neutral LNG cargoes,” executive vice president for Shell Energy, Steve Hill, said Monday.

“This first term deal is an important step in scaling up the market for carbon-neutral LNG and we are very grateful to our valued partner PetroChina for their collaboration in enabling this industry milestone.”

China is currently the world’s second largest importer of LNG, importing 67 million tonnes in 2020 and that figure is anticipated to nearly double by 2040, according to the Shell LNG Outlook 2021.

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