Blog: LNG’s big future after COP26

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Hard-line eco-activists at the COP26 conference in Glasgow last week didn’t get what they wanted, commitments to the end of coal power and to the end of subsidies for fossil fuels.

What they and the world got in the final (and non-binding) agreement was a call for “accelerating efforts towards the phase-down of unabated coal power and inefficient fossil fuel subsidies.”

The pushback that led to the words “phase down” on coal, instead of the originally drafted “phase out,’ came from India, with support from China. Coal makes up 65% of China’s power generation, and 71% of India’s.

Indian Environment Minister Bhupender Yadav argued against a provision on phasing out coal, saying that developing countries are “entitled to the responsible use of fossil fuels.”

And the push for the undefined words “unabated”’ and “inefficient” came from a range of  developing nations who still see fossil fuels as a ticket to better economies and standards of living.

Many of the developing nations made it clear that they are looking to natural gas and LNG to do that, if eventually to be replaced by renewables at some point down a long, long road.

Prime examples are India and Africa.

With hundreds of millions of African people living without electricity in the world’s poorest continent, African countries are increasingly turning to LNG to generate power. And most African governments have their eyes set on creating jobs and economic growth, not on decarbonization.

Thomas Camara, Ivory Coast’s minister of mines, petroleum and energy: “For our African nations, we have to ensure that our populations have access to energy. We will not turn our back to oil and energy companies so we can ensure the happiness, and even the existence, of our populations.”

In India, as in Africa, millions of people still don’t have access to electricity. India, already the world’s fourth largest LNG importer, wants to raise the share of natural gas in its energy mix to 15% by 2030, from the current 6.2%. Companies are investing billions of dollars in India to build gas infrastructure.

While Canada and the US talk of net-zero emissions by 2050, India targets 2070. And of the 54 countries in Africa, only South Africa has set a net-zero goal of 2050. While it received its first cargo of LNG this week, it will still be burning coal to generate power in 2050.

The pushback at Glasgow on coal power and fossil-fuel subsidies also came from China, which has a net-zero target of ‘before 2060.’ China and the US did unveil at Glasgow a deal to ramp up cooperation on climate change, but China is clearly committed to LNG for decades to come.

All this growing demand for LNG offers opportunities for Canada.

How Ottawa will address such opportunities is an unanswered question, but the potential for Canada was outlined by Dale Nally, Alberta’s Associate Minister of Natural Gas and Electricity, in an article carried by JWN Energy.

Here’s part of what Nally wrote:

“For regions without plentiful natural gas resources, the introduction of liquefied natural gas (LNG) presents a massive opportunity to lower GHG emissions. That is why many forecasts for global demand of LNG – including those by major consultancies like Wood Mackenzie, IHS Markit, and Rystad – continue to show demand increasing over the next two decades – especially in Asia.

“So it’s worth evaluating where in the world would be the best place to produce the LNG that will be used around the globe. The answer – from both an economic and environmental perspective – is clearly Canada.

“Critics are correct in saying that emissions from LNG don’t only come at the point of use, but also from the processing, transportation, and liquefaction process. In all these areas, Canada enjoys natural advantages that other jurisdictions lack.

“Our liquefaction facilities can be powered by hydro-electricity, unlike many competing LNG-producing jurisdictions.

“Our pipeline operators and natural gas producers are already world leaders in reducing emissions and have considerable incentive to abate to an even greater degree.

“Our cool climate is far more energy efficient to chill natural gas to a transport temperature than it is in Qatar or the Gulf of Mexico.

“Our shipping distances from BC to Asia are considerably shorter than the Gulf of Mexico, lowering transport emissions and overall cost.

“These advantages add up to a real opportunity for Canada to contribute to a net decrease in global greenhouse gases. Canada’s major LNG export hub already under construction, LNG Canada on the west coast, will produce 4 million tonnes of greenhouse gases per year, but will result in a global reduction of 60-90 million tonnes-per-year by making LNG available to replace coal.

“ Establishing direct links between Canada’s natural gas market and international customers also contributes to a stronger global energy system that is more resilient to the kind of energy shortages that are currently striking Europe and possibly even China.

“Carbon emissions know no borders. If Canadian emissions go up slightly in the short- and medium-term, but large, carbon-intensive modernizing economies around the world can lower theirs far more, it will be a major boon to the global effort to reduce carbon emissions.

“If Canada is serious about playing a leading role in reducing global emissions, LNG is an opportunity that the world cannot afford to miss.”

(You can read his full article here: http://ow.ly/OGpK50GMZiL)

Nally mentions forecasts from authorities that include these:

  • Wood Mackenzie: “The LNG market is on fire. . . , After plumbing the depths a year ago, the outlook for LNG has fundamentallyimproved with gas demand recovering strongly from the 2020 downturn and supply growth slowing. We believe robust prices and margins will prevail for several years.”
  • Rystad Energy: “Global natural gas demand is set to increase through 2040 by 26% to a monstrous 4,867 Bcm (billion cubic metres), with Asian demand being by far the largest addition (+537 Bcm versus 2020), as gas is needed to power the region despite growth in renewables.”

And there’s this from Shell (40% partner in LNG Canada):

  • “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.”

Finally, Canada will produce LNG with some of the lowest emissions anywhere in the world: 35% lower than the best-performing LNG projects and up to 60% lower than the overall global average.

The future could be ours. . . .

(Posted here 17 November 2021)

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