Cheniere Energy | Report on risk and impacts of natural gas use at Cheniere Energy

Status
Omitted
AGM date
Previous AGM date
Resolution details
Company ticker
LNG
Lead filer
Undisclosed filer
Resolution ask
Report on or disclose
ESG theme
  • Environment
ESG sub-theme
  • Climate change
Type of vote
Shareholder proposal
Filer type
Shareholder
Company sector
Energy
Company HQ country
United States
Resolved clause
The company is requested to prepare a report outlining the business case and premature write down risk for the global Liquid Natural Gas trade under a range of rising carbon price scenarios (say to USD30 to USD120 by 2030 in 2018 dollars) applied to the life-cycle emissions (production, transport and combustion) of the company's natural gas assets.

Such a report should include discuss of how carbon pricing, a parallel 'implicit price' derived by intergovernmental action or a third method of achieving the 2c scenario (such as shifting to hydrogen exports) under the Paris Accords will affect the longevity of the company's sunk and planned investments in Liquid Natural Gas infrastructure and the length of its carbon-adjusted economic lifespan.

The report should also include discussion of cost overrun, delayed starting and future technology risks run by Liquid Natural Gas industry compared to competing energy technology (primarily sun and wind, the two most mature, low cost forms of renewable energy).

The report should be produced at reasonable cost and omit proprietary information.
Whereas clause
Global action to reduce carbon emissions creates premature write down risk for the Liquid Natural Gas industry.

Understanding such risk is critical for investors to assess fair value for companies in the industry.

The US Department of Energy estimates natural gas extracted from North American wells and delivered to Europe or Asia by tanker as Liquid Natural Gas to generate electricity emits gas-well-to-wall socket life-cycle emissions of roughly 0.66-0.84 tonnes of carbon equivalent per megawatt-hour of electricity produced.

Coal produces 1.0-1.1 tonnes per megawatt-hour. Solar and wind 0.40 and 0.12 tonnes, respectively.

It is reasonable to expect that emissions tallied on common metrics such as the above to progressively undergo pricing or administrative reduction to meet the 2c objective.

To enable this, some experts see carbon prices rising from under USD1 0 today (depending on market) to USD100 or more per tonne by 2030 or 2040. For its part, the US General Accounting Office estimates the current unpaid 'social' - or 'negative externality' - cost of carbon at USD40 per tonne.

Given the above, carbon priced at USD40-USD100 per tonne in the near future can be expected to negatively affect the competitiveness of natural gas delivered to market a Liquid Natural Gas compared to lower emission alternatives.

The Rocky Mountain Institute estimates wind and solar installations are now cheaper and faster to build than natural gas plants. Further, the institute sees wind and solar technology falling in price for years to come. By contrast, Liquid Natural Gas technology is mature. Unlike renewable energy, Liquid Natural Gas projects also have long construction lead times. Liquid Natural Gas projects also are bedevilled by ballooning cost overruns (unlike renewable energy, in general).

For their part, wind and solar face energy storage challenges. The question then becomes whether the costs of overcoming these are greater than the life cycle carbon-emission differentials.

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