Investor Scrutiny, 2.0°C Target Could Slash Gas Project Investment by $1.3 Trillion
Investment in new natural gas supply will plummet by US$1.3 trillion, or nearly two-thirds, if a serious commitment to limit average global warming to 2.0°C drives down demand for the climate-busting fuel through 2040, according to a new analysis by Wood Mackenzie.
The summary of the report on Oilprice.com doesn’t assess the even faster drop in demand and investment that would result from a drive to hold average warming at 1.5°C. And it bakes in the assumption that gas “will be fueling the energy transition, at least at these early stages, and at least until battery and energy storage technologies evolve so much as to allow cost-effective, seamless integration of solar and wind power into the energy mix.”
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But the story still points to tough times ahead for anyone who expects a continuing boom for natural gas (more accurately cast by its critics as “fossil gas”), after years of being seen as a bridge to a renewable energy future.
“These days, investors are increasingly looking at the environmental credentials of every source of energy,” Oilprice writes. “While burning cleaner than coal, natural gas emits methane,” which is 84 times more potent a greenhouse gas than carbon dioxide over the 20-year span when humanity will be scrambling to get the climate crisis under control.
“Methane emissions, including from flaring and leaks, are a thorn in the side of natural gas developers and Big Oil, which continue to bet big on gas and liquefied natural gas (LNG) even as they pledge to become net-zero businesses by 2050 or sooner,” Oilprice adds. “Climate activists have now turned to attacking natural gas as the latest fossil fuel that should be kept in the ground. Investors, who are becoming more and more Environmental, Social, and Corporate Governance (ESG) conscious, also increasingly demand evidence of carbon reduction, carbon capture technology, and efforts at sustainability from gas projects and developments.”
Overall, “sustainable investment is booming, and investor activism on carbon has gone mainstream as more fund managers embrace ESG screening,” WoodMac Asia Pacific Vice President Gavin Thompson said in a release. “This increasing scrutiny of gas’ carbon intensity is shaping investment decisions on future supply.”
The projection runs counter to colossal fossil BP’s scenario analysis, which shows gas demand rising through 2050. “Gas technologies can play a major role in the low-carbon transition,” the company states in its latest analysis. “As countries and regions pursue a low-carbon transition, technologies such as biomethane, hydrogen, and gas with carbon capture could play an important role, serving to decarbonize sectors of the economy that are currently seen as ‘hard to abate’, and providing opportunities for long-term growth for the gas industry.”
BP is promising to reduce its oil production 40% by 2030, Oilprice notes, but plans to double its liquefied natural gas portfolio from 15 million tons today to 30 million in a decade.
WoodMac’s Thompson agreed that “gas has a bright future, critical to combating air pollution and transitioning the world to a net-zero future. Addressing emissions and exposure to carbon is vital. The gas industry of the future must become synonymous with ESG.”