It is not surprising that natural gas emerged “largely unfazed” at COP26, as policies to purify the air and reduce greenhouse gas emissions to combat climate change will continually support its use.
With 50% less CO2 emissions than the main competitor coal, gas will also remain the main backup fuel for the natural intermittence of wind and solar.
The US Department of Energy modeled in October that global gas demand would increase by more than 30% to reach 186 trillion cubic feet by 2050.
The liquefied natural gas (LNG) trade, of course, has been seen as the fastest growing commodity, and Morgan Stanley says global demand for LNG could increase by up to 50% by 2030.
As a reminder, at nearly 50 Gcf / d, LNG now represents 13 to 15% of the global gas market.
The evolution of gas replacing coal in an overwhelming majority of countries based in China and India is our most essential goal in the fight against climate change.
In the United States, for example, a 2020 study from the University of California, San Diego (thanks to my former employer!).
Reliable, abundant and affordable, BP World Energy Statistical Review 2021 reports that the world has about 6,645 billion cubic feet of proven natural gas reserves, a 35-40 percent jump from 2000.
With more and more suppliers such as the United States, this expanding sea of available gas is bolstering the huge growth in demand around the world.
China will increase its gas network by 60% by 2025 and India plans to double the length of its gas transmission network.
In the United States, where the shale revolution has made gas prices among the lowest in the world, S&P Global is tracking 45 new pipelines put into service over the next five years, and 16 of them are linked to terminals export of LNG.
The largest gas producer (~ 94 Gcf / d) and growing exporter of LNG (9-11 Gcf / d of LNG today), the United States now has six LNG export terminals, and this figure is expected at least double over the next few years. .
Estimates from our Department of Energy generally indicate that new US gas production exceeds new US demand by a margin of 2 to 1, leaving a lot to export.
And many more Democrats are supporting US LNG as a substitute for coal around the world than many want you to know: “DOE Secretary-designate Granholm signals his support for US LNG exports.
We beat our main competitor of “preferred global supplier” which also offers democratic, unattached, cleaner and more predictable procurement from the world’s best energy companies.
Namely, the United States accounts for over 40% of global LNG projects pending a final investment decision, Canada at around 25% and Australia at just 5%.
And from a moral standpoint, US LNG exports are helping alleviate deepening global energy poverty.
Although I am well intentioned, these COP climate summits have become notorious for always ignoring the elephant in the room: abject poverty made possible by starvation of energy.
In the West, we are “fully energy rich” and simply don’t have to see the world’s biggest problem: the vast majority of the world is “not energy poor”.
The decline in LNG exports by our domestic users is short-sighted: exports strengthen our gas industry by encouraging more production and new pipelines.
Our industrial and political groups who are trying to block LNG exports do not think enough: somewhere, Adam Smith is nodding to them.
A key study just explained this for oil: “IHS Markit: Banning US crude oil exports would likely raise gasoline prices, not lower them.”
The rise in US gas prices since June is not the result of an increase in exports but comes more from the media, traders and oil experts (the latter being limited when it comes to gas because gas, unlike the oil, is NOT a global commodity but always a globalized commodity) creating a link between the two (Figure 1).
In other words, Asian and European prices that recently climbed above $ 50 shouldn’t have pushed our own prices up because our exports have been high but mostly stable for months – with terminals of LNG operating near full capacity.
Even with world gas prices reaching record highs, there has not been a sudden surge in US exports to raise our own prices as we have not had the capacity to export more.
Power generation, industry (e.g. manufacturing) and LNG as a bunker fuel for ships are all high growth opportunities for natural gas – where gas is used more to replace fuels at higher prices. strong emission.
In fact, this year’s global energy crisis and soaring prices are leading many LNG buyers to look for long-term contracts to secure future gas supply, as consumption will increase much more than some of what you know. .
Another example of the continued importance of US gas, Venture Global LNG has just announced a 20-year supply agreement with China’s Sinopec valued at $ 30 billion.
India has also absorbed a record amount of US LNG as our sellers are still looking for the flexibility that is vital to combine longer term and shorter term contracts to attract new customers.
China and India are firmly in the “too big to fail” category, with high expectations of how their demand will grow over the next few decades, regardless of the circumstances.
S&P Global confirms the real take-away from COP26: “More climate finance, less coal could skyrocket US natural gas exports. “
And for any buyer, the larger our LNG contracts, the more we contribute to reducing potential future CO2 emissions.
This year’s energy crisis is already causing a retrograde return to coal, very revealing even in Europe and the United States
Being realistic about energy policy means recognizing that “anti-gas” positions are really only “pro-coal” positions.
Time is running out: Bloomberg reports that global CO2 levels have returned to pre-pandemic levels.
The demand for electricity in the still developing world (over 6.7 billion people) is growing so rapidly that even a sharp increase in gas consumption (figure 2) still causes gas to lose market share in favor of coal, the main source of energy (Figure 3).
The Rich and Fully Developed West (OECD) has provided the example of the evolution of coal replacing gas for power generation.
And remember that the International Energy Agency attributed this replacement of coal to gas as the reason the United States has been the climate leader in reducing CO2 emissions the most of any country – without the stifling regulations and insanely high prices that Europe fails with.
Climate conferences like COP26 never go as expected because of one fact: 85% of the planet is poor and a lot more energy is needed – and it has to be inexpensive and reliable because human development has priority.
Coal accounts for more than half of the energy used in some of these poor countries and more than 60% of the electricity, so the Western mandate of “only wind, only solar” is a solution for absolutely nothing. ,
Already bombarded by the ongoing economic destruction of Covid-19, the recommendation of the Intergovernmental Panel on Climate Change for a carbon tax of $ 200 per tonne and amounting to $ 27,000 per tonne of ‘by 2100.
Indeed, in terms of relying so heavily on weather-dependent energy, Brazil currently presents a gigantic problem for politically favored renewables: climate change makes them even less reliable.
In a changing climate, a greater emphasis on weather-dependent energy actually means MORE, not less, natural gas.
Hydropower is both much more established and reliable than wind and solar, but climate change makes it less available to generate electricity.
With hydropower generating more than 75% of Brazil’s electricity, climate change is putting the country in the throes of the worst drought in a century.
This has made Brazil the largest importer of LNG in the United States for three consecutive months.
Closer to home, low levels of hydropower due to climate change have forced Green California to have to build five more natural gas power plants to keep the lights on.
For all these reasons, we must remain at the heart of our climate concerns: gas technologies, which are still emerging as the centerpiece of the low-carbon energy transition strategy.
For natural gas, here are some of the options needed for net zero goals:
- Carbon capture and storage have become a priority for the gas industry, including for the huge production of LNG.
- Gas transport and storage infrastructure can be prepared for mixing hydrogen and transporting pure hydrogen, at a much lower cost than building new specially designed hydrogen networks.
- As I explained before, carbon neutral LNG shows how innovative the industry continues to become to improve sustainability and ESG positioning.
- Project Canary and Responsably Sourced Gas are game-changing and will make gas the fuel of choice in a decarbonizing world, also making the United States a “preferred global supplier” for natural gas.