Major fossil fuel players are making the message clear: The transition to a green future will require a lot more natural gas.
From Shell Plc to Chevron Corp., the world’s top producers plan to accelerate investments in the fuel. China continues to sign deals to buy liquefied natural gas after 2050, with European importers not far behind. The United States is moving forward with new projects that will make it the world’s number one exporter of LNG for the foreseeable future.
This boost marks a turning point for gas. The “cleaner” fossil fuel was seen as a short-term bridge to greener energy sources, and environmentalists have sought to phase it out amid concerns that the gas is much dirtier than advertised . Now, the idea that gas demand will peak soon is disappearing.
“LNG sellers look around this market and are pretty confident that demand for gas will be with us for decades to come,” said Ben Cahill, a senior fellow at the Center for Strategic and International Studies, a think tank. of Washington.
Russia’s invasion of Ukraine, and the subsequent energy crisis and record high prices, have changed the long-term outlook for natural gas. Europe rushes to replace Russian fuel as emerging nations sign long-term deals to avoid future shortages.
China on Tuesday signed a 27-year deal with Qatar to safeguard its energy security, and a German importer on Thursday signed a historic contract to buy LNG from the US until 2046, even as Germany aims to become carbon neutral a year earlier .
About 60 billion cubic meters of new gas production capacity has been approved since Russia invaded Ukraine, nearly twice as much as in the past decade, according to the International Energy Agency.
Doubling down on gas also makes sense for shareholders, said Saul Kavonic, energy analyst at Credit Suisse Group AG in Sydney. The fuel has been profitable in recent years, while the pursuit of green energy targets has been more of a struggle, he said.
Gas has been the main driver of earnings for energy companies such as Shell and BP Plc in recent years. Producers had plunged into the lower-margin renewable energy business years earlier, but are now rethinking those investments because of lackluster returns.
“Liquefied natural gas will play an even bigger role in the energy system of the future than it does today,” Shell Chief Executive Wael Sawan told investors this month as he outlined a shift in strategy after his promotion to the position in January. “LNG can be easily transported to the places where it’s needed most. And what’s more, on average, natural gas emits about 50% less carbon emissions than coal when used to produce electricity.”
Shell plans to increase investments in natural gas by 25% this year to a record $5 billion and maintain spending at that level through 2025. Last year, the London-based company joined Exxon Mobil Corp. and ConocoPhillips to invest in Qatar’s $30 billion LNG expansion. , the largest in the industry.
Gas is also key to the growth plans of Italian energy group Eni SpA, which was a big motivation behind Friday’s $4.9 billion deal to buy Neptune Energy Group Ltd. Elsewhere, Romania’s two biggest natural gas producers agreed this week to invest up to $4.4 billion ($4.4 billion). billion) in a Black Sea gas project after decades of debate. Chevron and Exxon are adding more staff to boost their gas trading activities in London and Singapore.
In the United States, the development of new LNG plants is being supported as buyers from countries such as Germany and Japan, both with ambitious green goals, sign long-term contracts with exporters. TotalEnergies SE gave a boost this month to plans to build a US export terminal, agreeing to buy stakes in the project and its developer. The French company is also in talks with Saudi Arabia to invest in its large natural gas project.
Still, there is debate about how much gas and investment will be needed, and demand will likely depend on how successful nations are in reducing emissions.
The IEA says gas demand must fall sharply by the end of the decade in order to keep the world on track to net zero by 2050. The agency in 2021 calculated that all new field development needs to stop of oil, gas and coal to meet this scenario.
Producers and financial institutions must “commit to ending financing and investment in the exploration of new oil and gas deposits and the expansion of oil and gas reserves,” the UN Secretary-General said United, Antonio Guterres, to reporters this month in New York. “We are running towards disaster, eyes wide open.”
One of the main arguments against natural gas is methane emissions, a byproduct of gas production that traps more than 80 times more heat than carbon dioxide in its first two decades in the atmosphere. Gas leaks of more than 3% make the fuel worse for the climate than coal, according to a study published by the National Academy of Sciences, undermining industry claims that it is a cleaner fossil fuel .
In order to market natural gas as a clean alternative to coal, major energy companies are working to reduce methane emissions. Shell, Exxon Mobil and more than a dozen other producers aim to achieve “near-zero” methane emissions by 2030 as part of an initiative launched last year.
“By finally getting serious about reducing methane emissions, big companies believe they can make a positive contribution to climate change and keep their assets commercially relevant,” said Ira Joseph, Global Fellow at the University’s Center for Global Energy Policy from Columbia.
–With assistance from David Stringer, Rachel Morison, William Mathis and Aaron Clark.
