LNG: good for many years yet

We almost enjoy those gloomy predictions that the LNG industry is soon to die; wishful thinking from green enthusiasts that seem to envision that the world will be all-renewables by the middle of next week, and using hydrogen as its primary fuel, world-wide, by the following weekend.

The transition to renewables and hydrogen is real enough, and urgent enough, and the faster we get there the better. But, realistically, we’re looking at introduction and execution over quite a few years, not overnight changes.

Even the International Agency — despite its recent and much ballyhooed “roadmap to NetZero by 2050” — sees natural gas and LNG remaining as energy leaders for decades yet.

We saw, for example, this recent depressing headline: “Many LNG Export Projects ‘Not Needed’ in IEA Net-Zero Model.”

But the IEA model is only a model, not a prediction, and it speaks of sweeping energy cutbacks and changes needed if the world really wants to get to Net Zero by 2050.

If the IEA’s roadmap were to be followed, notes Resource Works, the world would need:

  • Seven times the production of copper, cobalt, manganese and various rare earth metals by 2030;
  • The equivalent to installing the world’s current largest solar park, roughly every day;
  • The equivalent of adding a new battery gigafactory every 18 days for the next 10 years.

Thus Saudi Energy Minister Prince Abdulaziz bin Salman dismisses the IEA roadmap as a “la-la-land” scenario.  And India’s power and renewable energy minister, Raj Kumar Singh, describes net-zero goals as “pie in the sky.”

Singh says developing countries cannot not be expected to commit to net zero when they have contributed little to historic emissions, and are heavily reliant on carbon-intensive sectors such as steel and cement to grow their economies.

So let’s stick to the IEA’s earlier outlook (an outlook, not a model or prescription) for natural gas and LNG:

“Developing economies in Asia are the main engines of LNG growth, with the market share of LNG in total gas demand growing from 20% in 2018 to 40% by 2040.

“By 2040, the average gas molecule travels over 5,000 kilometres to reach consumers in developing Asian markets, nearly twice as far as today.”

Then we have Shell’s outlook, with Shell and its LNG Canada partners betting at least $40 billion that the world market for LNG will be there — and continue — as their LNG Canada plant at Kitimat comes online in 2025.

In its LNG Outlook 2021, Shell says: “China and India led the recovery in demand for LNG following the outbreak of the pandemic with both countries increasing their LNG imports by 11%.

“China’s announcement of a target to become carbon neutral by 2060 is expected to continue driving up its LNG demand through the key role gas can play in decarbonising hard-to-abate sectors. . . .

“Global LNG demand is expected to reach 700 million tonnes by 2040, according to forecasts, as demand for natural gas continues to grow strongly in Asia and gains further traction in powering hard-to-electrify sectors. As a result, more supply investment will be needed to avoid the estimated supply demand gap in the middle of the current decade.”

The Haisla and Nisga’a Nations have forecasts like that in mind as they plan (Haisla) and look into (Nisga’a) LNG export terminals on their territories.

True, the Kitimat LNG project from Chevron and Woodside has been put into a deep-freeze, as its owners look to shorter-term investments for quicker returns.

And, true, expert market-watchers such as Wood Mackenzie are cautious: “Gas will be the strongest-growing fossil fuel and will increase by 0.9 percent from 2020 to 2035. It is the only fossil fuel expected to grow beyond 2030, peaking in 2037.

“From 2035 to 2050, gas demand will decline by 0.4 percent. This relatively moderate decline is due to hard-to-replace gas use in the chemical and industrial sectors, which limits the impact of an accelerating decline in gas used for power.”

But that’s a far cry from such recent headlines as “Most of the world’s proposed LNG projects unlikely to be built as investors fall out of love with natural gas.”

Indeed, China is expected soon to overtake Japan as the world’s largest importer of natural gas, and Qatar aims to be the world’s biggest exporter of LNG, with plans to spend at least US$28 billion on expansion by late 2026 or early 2027.

Qatar plans to grow its LNG output by 40% to 110 million tonnes per annum by 2026. And Russia plans to beat that — to  increase its annual LNG production to 120-140 million tonnes. Clearly, they both see big world markets continuing. Indeed, Qatar has told its financiers it believes global demand for LNG will continue to climb for almost two decades.

The International Gas Union reminds us: “LNG and gas are key to unlocking access to secure, clean, and modern energy. Today, it can immediately reduce emissions, improve quality of life, health, and clean air by replacing coal, oil, and conventional biomass; and tomorrow, it will be the key pathway to decarbonisation as we add more renewable gas, hydrogen, and CCS. “

Good for the world, then, and for some time to come. And with benefits for First Nations Peoples in BC.

(Posted here 29 June 2021)

First Nations LNG Alliance Newsletter