More natural gas production, LNG projects needed to better balance global energy markets, says IGU

The war in Ukraine and years of underinvestment have put the global natural gas market in an “unstable equilibrium” that could persist for decades without additional funding for LNG production and infrastructure, according to the International Gas Union (IGU).

In its annual Global Gas Report, the IGU and contributors from Rystad Energy AS and Snam SpA outlined how a surge in liquefied natural gas, largely from the United States, helped to moderate price spikes from record levels following last year’s invasion of Ukraine.

However, prices are still well above pre-war aa levels as the razor blade of the global supply balance led to more volatile price swings. Looking to the medium-term horizon, IGU researchers state that it has not been possible to ensure the growth of natural gas supplies could derail energy transition plans unless companies and governments increase investment in natural gas.

“Otherwise, the required natural gas supply may not be developed to meet demand, resulting in increased emission levels and increasing frequency of outages,” the IGU researchers said.

Falling investment

Between 2014 and 2020, the level of investment in supply development projects fell by 58%, according to the IGU. Funding for production is increasing from 2021, but available reserves could decline further by mid-century, according to scientists.

With existing and approved production projects, global natural gas supply is expected to reach 4,100 billion cubic meters (Bcm) this year. By 2030, supply is expected to drop to 3,100 Bcm and by 2050, it could drop to less than 1.00 Bcm.

IGU researchers wrote that natural gas will be needed as a dispatchable balancing resource to meet soaring energy demand under “all demand scenarios assessed in this report, meaning natural gas and low-carbon gases play a key role in future electricity systems.”

As share of renewable energy Used in the United States and rising in other electricity markets around the world, finding the right mix of gas-fired generation and other sources has been a struggle for some grids experiencing peak-hour surges. Texas experiences extreme summer heat and unusually cold winter storms there was a threat of power outages for years in large areas of the state due to impacts on gas plants.

Australia was too experiencing similar problemswith declining domestic gas production and increasing demand for electricity during peak weather events outpacing the deployment of renewable generation. In turn, Australia’s supply problems have increased pressure on the global market as regulators strengthen mechanisms to divert export LNG input gas to the domestic market during outages.

However, catching up on lost time and future deliveries could be costly.

Researchers at the Institute of Energy Economics in Japan recently estimated that it could take $7 trillion additional investment around the world to ensure sufficient supplies globally by 2050. Its recommendations for vital investment included the development of new gas fields and LNG export facilities, as well as the maintenance of existing infrastructure.

The IGU report comes as one of the world’s largest manufacturers grow even bigger with acquisitions aimed at increasing oil and gas supplies in the future.

Flexible LNG

Meanwhile, the Energy Information Administration recently estimated that the pace of global energy demand will mean a surge in US LNG exports until 2050 to stabilize supplies.

Just as natural gas will be essential to support alternative energy plans, the IGU wrote that LNG infrastructure will be needed to ensure that gas can be efficiently delivered to markets in need.

“The flexibility of LNG has been demonstrated on multiple occasions – notably during the war in Ukraine – with the United States increasing its exports to Europe by 159% from 2021 to 2022, shifting traditional LNG trade flows from Asia to Europe…,” the IGU researchers wrote .NGI’s Henry Hub Fixed forward curve shows prices falling into the low $3/MMBtu range starting in early 2024 before rising back to $3.50 in mid-summer. Henry Hub could climb through the rest of 2024 before peaking around $4.60 in early 2025 when the first trains from two other Gulf Coast LNG terminals currently under construction. expected to be online.

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