Natural Gas Set to Grow for Decades


Gas block. Tyumen. Credit: DMyshkin/CC BY-SA 4.0

Natural gas touted as a bridge fuel is facing growing opposition and pressure from environmental groups and governments. A couple of years ago, it was hailed as the fuel that would bridge the fossil fuel era and the renewable energy era.

Recently, natural gas was denied transition status by the European Union (EU). In fact, Brussels is set to draft a new rule where the EU authorities set an emissions limit of 100 grams of CO2 equivalent per kilowatt-hour for gas-fired power plants. The level is said to be unattainable for these plants, which means that they could lose billions in funding. However, gas is still likely to remain a key player in the energy transition no matter what labels the EU attaches to different forms of energy generation.

Furthermore, the world’s natural gas demand has been growing steadily for decades. Though, it may inch down this year due to the pandemic and its impact on general energy demand rather than the start of a trend, according to the International Energy Agency. The long-term projections for gas demand tend to be positive due to the highest polluter among the fossil fuels, coal that needs to be replaced with something (which may not be solar and wind alone).

Rob West, founder and principal research analyst at energy technology consultancy Thunder Said Energy stated that they had build models that could decarbonise the world twice over. West added that the lowest-cost way he could get to net-zero [carbon] energy by 2050 would be to treble the demand for natural gas.

West is not alone with his beliefs that gas is indispensable for lowering the world’s emissions. Germany, one of the enthusiastic adopters of solar and wind energy is also the driver behind the Nord Stream 2 project that pitted Washington against Berlin. The chief executive of Austria's OMV recently stated that they continued to be committed to Nord Stream 2. Seele stated that if Nord Stream 2 was not finished, Europe might have to import more LNG from the U.S.

Moreover, the biggest market for gas is Asia. It is likely to remain the biggest in the coming years. Asia is also decarbonising, which reiterates the bridge nature of the gas. Despite the word around for falling costs of solar and wind, China and India are switching the power plants to gas and building solar and wind farms.

Wood Mackenzie recently forecast that changes in investor behaviour could slash investment in natural gas by as much as $1 trillion over the next 20 years. According to the firm, gas demand could peak by them, and the reduction in investments may not be too serious a problem.

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