An analysis says all the proposed LNG export plants won’t be needed.
Billions of dollars worth of liquefied natural gas projects won’t be needed in the next decade as the world strives to limit its carbon footprint and rein in climate change, a new analysis finds.
The shale revolution spurred a flurry of proposals to build U.S. export terminals to ship LNG overseas, but investors should take a long hard look at the projects they intend to fund amid a push to limit global warming within 2 degrees Celsius in the next century, according to a report by Carbon Tracker, a London-based nonprofit dedicated to limiting greenhouse gas emissions.
“Investors should scrutinize the true potential for growth of LNG businesses over the next decade,” James Leaton, the group’s head of research, said 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 stakeholders.”
The group identified $283 billion in proposed LNG projects worldwide that are “likely to be surplus” in a low-carbon economy. One-fourth of that unneeded investment, $71 billion, has been slated for the U.S., the group said.
Carbon Tracker found that a majority of the LNG needed within the next 10 years will come from projects already built, under construction or those in which companies have already announced a final investment decision. Global demand in a lowcarbon world is not robust enough to justify projects proposed by most of the 20 companies eying massive investments to supercool natural gas, Carbon Tracker said.
Only three companies, Houston-based Cheniere Energy and Noble Energy, and Eni, an Italian multinational oil and gas corporation, have additional projects needed to satisfy the world’s appetite for LNG by 2025, the report says.
“Only the cost efficient and the cost effective ones will go ahead,” the group’s senior analyst, Andrew Grant, said in an interview with FuelFix.
The report unveiled this week adds to a chorus of doubts about the flurry of U.S. LNG export projects proposed in the aftermath of the shale boom that unleashed vast supplies of cheap natural gas.
“It’s a fairly widespread view that not all of the pipeline of projects that have been announced are going to be needed,” Grant said.
Natural gas has often been trumpeted as a cleaner fossil fuel, but Carbon Tracker said there’s a limit to the amount of gas the world can use if it hopes to stick to its 2 degrees Celsius goal. For example, natural gas production can lead to leaks of methane, a potent greenhouse gas, in turn undercutting the fuel’s climate advantages over coal, Carbon Tracker said.
There’s still a market for LNG as various countries use the fuel to transition away from coal and oil, but “a perfect storm of factors” have culminated to power the push toward a low-carbon world, the group said.
Renewable energy has gotten cheaper, which could allow some countries to “leapfrog over gas straight to renewables,” creating a further drain on demand for LNG, Carbon Tracker said. Global demand will also be influenced by stronger energy efficiency measures, new storage technologies and volatile energy prices, the group said.