Key Resources

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Key Quotes

Mark Fulton, Senior Research Advisor to Carbon Tracker: "Natural gas is complex when seen in the context of a climate-constrained world. It can deliver better outcomes than coal, but gas must continue to work on reducing its fugitive emissions and there is a possibility that if it reaches too large a share of the energy mix then in the longer run this could still be incompatible with a 2⁰C outcome"

James Leaton, Research Director at Carbon Tracker: "Investors should scrutinise the true potential for growth of LNG businesses over the next decade. 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 shareholders"

Anthony Hobley, CEO Carbon Tracker: "Fugitive emissions are on the run in the U.S. – regulators, investors and industry leaders are all out to ensure gas can demonstrate it has a climate advantage over coal"

Andrew Grant, Lead analyst at Carbon Tracker and co-author of the report.: "The size of the gas industry in North America could fall short of industry projections – especially those expecting new LNG industries in the U.S. and Canada. Avoiding the combination of U.S. shale gas being exported as LNG will be important if we are to use the carbon budget most efficiently "

Low carbon scenarios do include the potential for gas demand to grow over the next decade. But if we are to stay within a carbon budget the world needs to be selective in developing gas supply, in order to ensure we use the remaining budget most efficiently.

Key Findings

LNG left on the shelf?

The analysis, which completes Carbon Tracker’s series of Carbon Supply Cost Curves, follows a similar approach to the oil and coal studies published last year that identify high-carbon, high-cost projects for investors. It finds that new projects that rely on an LNG price of more than $10/mmBtu may not be needed over the next decade.

The report highlights that $283 billion of possible liquefied natural gas (LNG) projects to 2025 are likely to be surplus to requirements in a low demand scenario.

In particular the number of LNG plants in the US, Canada and Australia could disappoint those expecting large LNG industries to develop.

The study finds that over the next ten years $82 billion of potential capex in LNG plants will not be needed in Canada, $71 billion in the United States and $68 billion in Australia in the lower demand scenario.The value of unneeded LNG projects rises to $379 billion by 2035.

European diversity

Europe has a range of gas supply options – and as a result may not need them all in the next couple of decades. The existing pipeline infrastructure determines much of the trade, with Russian gas on tap. The volume and price supplied by Russia will impact the marginal gas options for remainder of the market. Again the breakeven threshold for a low demand scenario is around $10mm/Btu.

There is also LNG overflow into the European market which could depress the spot price even further over the next few years, meaning more expensive options won’t break even for a while.

The commitments to increase renewables and reduce emissions in the EU leave little room for gas growth, with cheaper renewables continuing to displace coal.

High carbon high cost

A consistent theme to our cost curve analysis has been to identify the high carbon, high cost options which aren’t consistent with a reasonable carbon budget.

Gas is a mixed bag which prompts a wide range of responses, which touch on issues beyond debating its climate benefits to energy security and water pollution.

Sticking to our financial and climate perspectives, the biggest question marks arise over unconventionals and LNG. The combination of these two gas technologies appears to be the worst option, although fortunately there are limited options in this area at present.

ETA Research Papers

The report is accompanied by two research papers which analyse gas supply and demand in more detail, produced in partnership with EnergyTransition Advisors.