Quarter of forecast LNG supply needed by 2040 to meet 2C global warming limit

09/12/2020 08:27 LNG

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Under a climate pact to cut global warming, nations have committed to a long-term goal of limiting the average temperature rise to below 2C above pre-industrial levels and to pursue efforts to limit it even further to 1.5C.

Only a quarter of forecast new liquefied natural gas (LNG) supply will be needed to meet demand by 2040 under measures aimed at curbing global warming below 2 degrees Celsius, a report by consultancy Wood Mackenzie showed on Wednesday.

 

Under a climate pact to cut global warming, nations have committed to a long-term goal of limiting the average temperature rise to below 2C above pre-industrial levels and to pursue efforts to limit it even further to 1.5C.

 

Wood Mackenzie said tougher government measures to curb warming will increase renewables investments and energy efficiency, putting gas demand under pressure.

 

Green hydrogen fuel, extracted from water with electrolysis powered by renewable electricity, will become a major competitor to gas towards the end of 2040 and achieve a 10% share of total primary energy demand by 2050.

 

This will be a challenge for companies considering final investment decisions (FID) on new LNG projects.

 

"In a 2 degree world, only about 145 billion cubic metres (bcm) per annum of additional LNG supply is needed in 2040 compared to 450 bcm/yr in our base case outlook," said Wood Mackenzie principal analyst Kateryna Filippenko.

 

The consultancy's "base case" scenario implies 3C warming.

 

"If we consider the imminent FID for the Qatar North Field East expansion, the space for new projects shrinks down by 77% to 104 bcm/yr by 2040 compared to our base case," she added.

 

In stark contrast to last year's record level of approvals for LNG production plants, this year's oil and gas price drops have forced companies to delay decisions on new projects and write down investments in existing plants.

 

However, industry executives in September said they expected LNG demand to increase steadily for several decades, helped by economic growth in Asia.

 

Wood Mackenzie said only a few Australian backfill projects - those which commit new gas to existing projects to allow them to continue operating beyond their expected life - will go ahead, pushing the country down the list of top LNG exporters.

 

The expansion of Canadian and Mozambique LNG capacities is unlikely to materialise, it added.

 

Backfill projects do not add new capacity but prevent volumes from leaving the market. Low LNG prices could wipe out any new investment in more economically challenging projects, and only the most cost-efficient and flexible ones will survive.

 

Around 12 trillion cubic metres of undiscovered gas resources could be stranded - more than three times the amount of gas produced worldwide this year.

 

source:energy.economictimes.indiatimes.com

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