$300B wasted on natural gas projects

By Jaclyn Brandt

Carbon and natural gas could soon be at odds, according to a new report by the Carbon Tracker Initiative. The report found that by 2025, there will be $283 billion of surplus liquefied natural gas (LNG), based on projects currently underway.

Map of LNG production needed and not needed 2015-2035. Credit: CarbonTracker.org

The report found that gas can continue to grow, but not at the rate the gas industry believes — due to numerous factors, including carbon-emission rules.

“We certainly don’t see any prospect of a ‘golden age of gas’, as the International Energy Agency suggested a few years ago,” said Anthony Hobley, CEO of Carbon Tracker, in a statement.

The UN target limits global warming to a 2?C target, and the report said that in order for this to happen, the energy industry needs to be more selective in gas projects.

“Gas is a complex fossil fuel,” Hobley added. “The gas industry argues that coal is the enemy and gas is part of the solution. Obviously there is a push to position it as a bridge to a low-carbon future and there is some basis for that, particularly in North America and Europe. There is some room for growth, but nowhere near as much as the gas industry would have us believe. Certainly in the LNG sector, most of the capacity that will be needed for the next 10 years has already been built.”

Natural gas is considered carbon-emitting because production results in leaked methane. Hobley explained, “Gas can be efficient, but more needs to be done, particularly on fugitive emissions. We have a very hazy understanding of these fugitive emissions in regions such as China and Russia. This is an area where the industry clearly has to work harder if gas is to be perceived as a cleaner fuel.”

However, Jake Rubin, director of public relations with the American Gas Association, told Fierce Energy that “Natural gas is clean, domestic, abundant, efficient and affordable, making it the perfect foundation fuel to help strengthen America’s economic recovery, meet our environmental challenges and improve our overall national security by reducing our dependence on foreign energy sources.”

Rubin explained that the abundance of natural gas in the United States has created a landscape that can help “address many of the challenges facing our economy and environment,” but that the regulatory environment has not yet caught up to the abundance of natural gas.

“It is critical that business models, fuel choices, regulation and energy policy be re-evaluated in light of the new opportunities presented,” Rubin told FierceEnergy. “Natural gas utilities, through their roles in communities across the nation, are already bringing the benefits of natural gas to homes and business. We are fueling the future where wise and efficient growth of natural gas consumption will help address many of our energy challenges.”

The report found that certain aspects of LNG infrastructure, including the production of US shale gas or Australian coal-bed methane, emit high levels of greenhouse gases (GHG) — and only 17 percent of LNG produced by North American Shale gas or Australian coal-bed methane is needed.

Of the planned projects that will cause a surplus, the report found $82 billion in Canada, $71 billion in the United States, and $68 billion in Australia — all in the next 10 years — due to carbon regulations.

“Many parts of the world do not have the infrastructure needed to take advantage of gas,” Hobley said, “and we are getting to the stage where renewables are becoming more viable. If we can scale renewable energy to the level needed, then there will be a jump straight from coal to renewables. If there is a breakthrough on energy storage, it will be a game-changer.”

The study also looked at the 20 largest LNG companies in the world, and found that 16 of them are looking at major future projects that are unneeded. Three — by Eni, Cheniere, and Noble — are working on projects that are needed to meet demand by 2025. Only one company, Total, is not planning on developing any new LNG projects by 2025.

“Investors should scrutinize the true potential for growth of LNG businesses over the next decade,” said James Leaton, Carbon Tracker’s head of research, in a statement. “The current oversupply of LNG means there is already a pipeline of projects waiting to come on stream. It is not clear whether these will be needed and generate value for shareholders.”

For more:
– view the report