Save for later Print Download Share LinkedIn Twitter With a key focus on ensuring Japan’s energy security, Inpex is now challenged to make LNG cleaner than ever as it embarks on its next phase of projects. Following Tokyo’s pledge to achieve carbon neutrality by 2050, Inpex — 19% owned by the government — also announced corporate net-zero targets for its Scope 1 and 2 emissions by 2050 and to reduce the carbon intensity of its operations by 30% by 2030. The operator of Ichthys LNG project in Australia has identified several techniques as key to its energy transition strategy, including carbon capture and storage (CCS), its cousin carbon capture, utilization and storage (CCUS), hydrogen/ammonia, and carbon recycling methods such as methanation. Such efforts could be boosted by the Japanese government’s plans to launch a pilot carbon exchange next year by inviting the private sector to conduct emissions trading on a voluntary basis. “The objective of this scheme is not merely to trade in emissions, but to encourage companies to invest in climate change response measures,” Inpex CEO and President Takayuki Ueda told the recent Energy Intelligence Forum 2021. “If the regulatory scheme is well designed, it will really contribute to and boost our efforts, such as CCS and hydrogen business, in the future.”ToolboxThe Inpex boss has identified CCS and CCUS as the most important decarbonization tools for the firm to reduce carbon dioxide emissions from its upstream assets. It is now evaluating the feasibility of a scheme to sequester carbon captured at Ichthys and looking for a suitable injection site in the vicinity of Darwin where the Ichthys project is located. The urgency to mitigate emissions is increasing. Gas fields that are designed to supply Ichthys — Brewster and Plover — have greater reservoir CO2 levels than gas fields that have previously supplied LNG plants in Australia. The Plover field will be required to maintain LNG production at the 8.9 million ton per year project but the Plover reservoir contains more than twice the CO2 content than that contained by Brewster — which currently supplies gas to Ichthys. Ueda did not provide a specific carbon price necessary to make CCS economic, but says a certain carbon price will be “very much essential” to make CCS a real big business. The Australian government announced recently that CCS projects will be eligible for carbon credits in a bid to help operators achieve their carbon-reduction targets. With CCS, Ichthys could in the future produce blue hydrogen to meet the requirements of buyers, Ueda said, adding this is something under consideration. Sanctioned in 2012, the two-train Ichthys project is understood to have the land and infrastructure to accommodate four additional trains.Japan has announced major ambitions to become a hydrogen society and has set cost-reduction targets for hydrogen to become competitive with LNG. Ueda highlighted that ammonia is also being favored due to challenges with shipping hydrogen, adding that domestic power utilities are seriously considering ammonia as a future fuel. Inpex is now studying the feasibility of producing blue ammonia based on gas feedstock with Adnoc in Abu Dhabi. However, he admits it would be challenging to meet Japan’s goal of importing 3 million tons of ammonia by 2030. Eyeing DemandBesides cost challenges, Ueda stressed the importance of focusing on demand, not just supply. “The demand side is different — users, companies, individuals. If they really want hydrogen and ammonia, I think the government target may be realized. But it seems at this moment that it is a really, really extraordinary high-level target,” he said. “We'll do our best to reach that target, but it really depends on technological development and customer behavior.” To maximize the use of Japan’s existing extensive gas infrastructure, Inpex is also studying methanation technology — capturing CO2 and reacting it with hydrogen — and now operates a demonstration plant at Niigata in Japan which would be expanded by 50 times. Inpex plans to inject synthetic methane into the national gas pipelines by 2030 and contribute to the government’s target to use synthetic methane amounting to 1% of Japan's entire natural gas usage by that year. Going forward, Ueda said Inpex would consider producing synthetic methane abroad, with Australia a possible contender, and shipping them back to Japan.Carbon-Neutral LNGBut before these new technologies get commercialized, Inpex is turning to carbon-neutral LNG to help its buyers decarbonize. Carbon-neutral LNG trade — where emissions are offset by carbon credits — is gaining traction, although it remains niche and highly customized with no consensus on the type of emissions covered or cost of offsets. Around 15 cargoes have been delivered so far this year — equivalent to 1 million tons — mainly to Asia, of which three deals involved Inpex as the seller to Japan. Ueda notes decarbonization is a priority for Inpex’s customers and their end-users and he expects demand for cleaner LNG to grow in the future. Apart from a lack of universal standards for measurement, reporting and verification of emissions, which is still a work in progress, it’s still unclear how sellers and buyers would share the costs of decarbonization. About three-quarters of an LNG cargo's life-cycle emissions is produced by the combustion of LNG by the end-user. Instead of splitting the costs for offsetting Scope 1 and 2 borne by the seller and Scope 3 by the buyer, Ueda said Inpex would work cooperatively with its customers and achieve consensus on the appropriate price for credits.