The energy woes that befall the world in 2022 brought about the double whammy of rapidly working on diversifying the energy mix with more renewables while ramping up the crude oil and natural gas production to appease the increasingly intertwined concepts of energy security and transition to a green and low-carbon future. In this shifting energy landscape, gas is still forecasted to play a crucial role and act as a trump card while the world embraces the race to net-zero.
This was confirmed at the G7 summit in Hiroshima under Japan’s 2023 Presidency of the Group of Seven (G7) when leaders highlighted that further investments in the gas sector would be needed to address potential shortfalls due to the current energy crisis. With gas keeping its position as the unchallenged king on the global energy stage, the G7 also underscored that ramping up deliveries of liquefied natural gas (LNG) could play an important role in the energy arsenal, propelling the transition to clean energy forward.
Stepping up renewable deployment is also seen as a key piece in the puzzle to bring a green and low-carbon energy future to life. Bearing this in mind, the G7 intends to expand renewable energy worldwide through a collective increase in offshore wind capacity of 150 GW by 2030 and a collective increase of solar PV to more than 1 TW by 2030.
With the conclusion of the G7 summit in Japan at the forefront and ahead of the G20, COP28 and other international events, a coalition of organisations from across the global natural gas industry, including the American Petroleum Institute (API), U.S. Chamber of Commerce, Asia Natural Gas and Energy Association (ANGEA), International Gas Union (IGU), LNG Allies, U.S. LNG Association and Western States & Tribal Nations Natural Gas Initiative highlighted that natural gas would be essential for meeting global energy needs.
The organisations underscore: “We commend the decisive leadership of Japan and the G7 nations for supporting investment in natural gas infrastructure in the final communique. The G7 statement reaffirms that natural gas will remain essential to meeting growing global energy needs and demonstrates that the world’s leading democracies support the role of responsible natural gas producers in helping to ensure global energy security while advancing our shared climate goals.
“In the coming decades, the world will demand more energy, not less, and natural gas will play a foundational role in the global energy mix for decades. The importance of this role will only grow as an increasing number of fast-growing countries aim to expand energy access for their citizens while reducing heavy reliance on coal with an increased supply of liquefied natural gas.”
With the G20, COP28, and other international gatherings, drawing near, these organisations emphasise their commitment to reducing global greenhouse gas (GHG) emissions while promoting investment in the natural gas value chain in a bid to “improve quality of life, secure global energy systems, and elevate environmental standards.”
Rystad Energy research recently showed that global energy reliability concerns were triggering a surge in oil and gas investments, as expected investments in fossil fuels in 2022 and 2023 surged by $140 billion with energy shortages and sky-high prices causing the spending estimate to jump to almost $1.1 trillion, while before the Ukraine crisis, the two-year total was projected at $945 billion.
This $140 billion growth encompasses an additional $80 billion increase in shale production, as activity climbed 30 per cent and pricing for oilfield services jumped nearly 50 per cent, while offshore production accounted for $40 billion in growth, with other onshore activities expanded by an additional $20 billion.
However, the energy market intelligence group believes that this uptick is only temporary. In light of this, the company advises other service players in the sector to capitalize on this shift now before the focus returns to the energy transition.
Audun Martinsen, head of supply chain research at Rystad Energy, commented: “Service companies should make the most of this upturn now, while keeping one eye firmly on the future. The energy transition is not slowing down; huge waves of investments in renewables and clean tech are on the horizon. So, to ensure their long-term success, service companies should adapt their offerings now to capitalize fully on the inevitable green revolution.”
Furthermore, Rystad Energy claims that the energy security concerns have unlocked significant additional investments in oil and gas, boosting spending forecasts and sending the expected timing for peak oil demand out in time. As a result, the first wave of extra spending over the past 15 months mainly went to oil and gas, while low-carbon industries faced a slowdown due to high inflation and shortages in the supply chain.
Despite this, the firm is confident that the low-carbon spending will bounce back, as energy security is “not only about securing oil and gas here and now but also about securing cleaner energy for the future.”
To drive this point home, Rystad underlines that the U.S. Inflation Reduction Act and the recently announced Critical Raw Mineral and Technology Acts in the European Union will strengthen the significant investment cycle brewing in the renewable and clean-tech sectors. In lieu of this, solar, wind, carbon capture, hydrogen, and batteries are the markets, which are set to benefit from policies aimed at pushing low-carbon deployment forward and building up local supply chains.
“Gaining control of the supply chain is crucial for countries and regions to become less dependent on global value chains. Even though the sun shines and the wind blows in every country, the energy must still be harnessed and stored locally. This can only be done with a reliable, often local, supply chain,” points out Martinsen.
According to the International Energy Agency (IEA), about $2.8 trillion is set to be invested globally in energy in 2023 while the global investment in clean energy technologies is on course to rise to $1.7 trillion in 2023, with solar set to eclipse oil production for the first time. The remainder, slightly more than $1 trillion, is going to coal, gas, and oil.
U.S. energy projects and permitting reform challenges
One of the biggest issues facing the development of energy projects in the U.S. – new low-carbon energies and oil and gas – is permitting reform. In line with this, the Biden administration has been urged to address – what is sees as – the broken permitting process, which is halting U.S. energy development. By some, the bipartisan agreement to raise the nation’s debt ceiling is perceived to be a step in the right direction to tackle the permitting reform challenge.
Mike Sommers, API President and CEO, remarked: “We applaud the Congress for passing the debt limit bill that includes important progress on permitting reform. Our current system for reviewing the infrastructure projects that fuel our economy and support our way of life did not become an endless gauntlet of bureaucratic hurdles overnight, and it will take more than one step to develop a workable process. This is a positive start, and we look forward to continuing to work with policymakers on both sides of the aisle to build on this progress.”
Wood Mackenzie’s Ed Crooks explains that the bipartisan agreement sets time limits for environmental reviews, but is seen as only ”initial steps towards more efficient permitting.” As this bill included provisions to expedite the Mountain Valley Pipeline, which will transport natural gas from northwest West Virginia to southern Virginia, Crooks predicts that the legislation will not have a significant impact on this project in particular, or others across the United States.
“The key provisions include new deadlines for environmental reviews: one year for an initial environmental assessment, and two years for a more detailed environmental impact statement. The bill also specifies maximum numbers of pages for those documents, makes clear that analysis for previous reviews can often be re-used, and sets procedures for deciding which government bodies have responsibility,” elaborated Crooks.
In response to the passing of the debt ceiling legislation, American Clean Power (ACP), stated: “While ACP is appreciative of the steps taken to include much-needed reforms to improve efficiency of the permitting process for clean energy projects, it’s critical that Congress build upon these initial steps and tackle comprehensive, meaningful reform to improve our nation’s clean power transmission capabilities and bring about the clean energy future America needs.”
On the other hand, certain environmental groups view the deal to raise the debt ceiling in the U.S. as another mechanism that oil and gas players can take advantage of to get a green light for more fossil fuel projects in the future.
These environmental activists, such as Earthjustice, see LNG projects – like the Alaska LNG project, a $38.7 billion fossil-fuel infrastructure plan to export LNG – as carbon bombs and hydrogen projects, as a way for Big Oil and Gas to delay the energy transition to a clean future.
“The oil and gas industry is hyping up hydrogen in sectors where we already have superior clean energy alternatives. We should follow through on the transition to clean electricity and modern electric vehicles and appliances, rather than get distracted by the fossil fuel industry’s hydrogen gamble,” outlines Earthjustice.
ENB Top News
ENB
Energy Dashboard
ENB Podcast
ENB Substack
The post Natural gas hailed as backbone of energy mix with security of supply and decarbonisation vying for attention appeared first on Energy News Beat.
Energy News Beat