Just a couple of years ago, natural gas was declared a "transitional fuel", which will bridge the fossil fuel era to the renewable energy era, and became the target of massive attacks and pressure from various environmental groups and governments. However, the European Union has recently stripped natural gas of its transition fuel status.. This may seem like the beginning of an anecdote, but Brussels is really serious, more than ever: in the draft of the new regulation, the European authorities have set a new emission limit - 100 r. CO2 equivalent per kilowatt-hour for gas-fired power plants. Such a level is unattainable for such power plants., which means, that they could lose billions in funding, as investors flock in droves to projects with the coveted label "transitional". But still, whatever labels the EU puts on various types of energy generation, gas is likely to retain a key role in the transition to new energy sources.
Global demand for natural gas has been growing steadily for decades. According to the International Energy Agency, this year it will decrease slightly, but it is rather the impact of the pandemic on energy demand in general, not the beginning of a trend. Long-term forecasts for gas demand indicate growth, as the largest pollutant among fossil fuels, coal, needs to be replaced. This "something" cannot be only the sun or the wind.
“I have built models of, how can we decarbonize the world in half, – recently announced by Rob West, Founder and Principal Analyst at Thunder Said Energy, an energy technology consultancy. - And the cheapest way to get to 2050 a year of clean energy with zero carbon emissions is to triple natural gas demand. In such a power system, we will have 11,32 trillion cubic meters of gas ".
West, of course, not alone, claiming, that gas is indispensable for reducing global emissions. Germany, one of the largest driving forces in the transition to renewable energy sources and an active supporter of solar and wind energy, is also the driving force behind the Nord Stream 2 project, who turned Washington against Berlin. And it's not even about Russia's political influence on the largest European economy., but in that, that the Russian gas pipeline is a direct competitor to the American LNG. And if what is said is not enough to understand, what the future holds for natural gas, then the fact that, that top managers of European companies, participating in the project, literally clinging to it, despite threats of further sanctions from Washington.
“We remain committed to Nord Stream 2, – the chief executive of the Austrian company OMV told Bloomberg. - I am not discussing withdrawal from the project financing. This option is not considered ". “We have already done our job, we have already financed the project, – said Seele. "What will happen, if Nord Stream 2 is not completed? Europe, perhaps, will have to import more LNG from the USA, and this is the reason for the tension, caused by this initiative ".
Europe tracks emissions, arising from LNG production in general and in the USA, in particular, so this could be a problem for the American "blue fuel". Certain difficulties may arise in the EU itself, since alternatives to natural gas are either very expensive (Green hydrogen), either unreliable as the main source of energy (sun and wind).
certainly, Europe is far from the only gas market in the world. And not even the biggest. The largest market for gas is Asia and, probably, and will remain so for the coming years, if not decades. Asia is also engaged in decarbonization and then, How does this happen, shows the role of gas as a fuel for the transition period. Despite the hype about declining solar and wind energy costs, China and India are in no rush to shut down their coal plants, but they are being transferred to gas, to build solar and wind.
Among other things, experts indicate, another problem may arise. International consulting firm Wood Mackenzie recently released a forecast, according to which changes in investor behavior may lead to a reduction in investment in natural gas production over the next 20 years by whole 1 trillion. dollars.
“Investments in sustainable development projects are skyrocketing and investor engagement in reducing carbon emissions has become mainstream, as more fund managers use ESG screening (index of environmental, social and governance factors). An increasing focus on the carbon intensity of gas is driving investment decisions for future supplies. ", – notes Wood Mackenzie VP of Asia Pacific Gavin Thompson.
According to Wood Mackenzie analysts, by then, gas demand may peak. If this happens, then reducing investment may not be the most serious problem. What if, what we call the transition to new energy, turns out to be a bubble? Rob West claims, that it is so. Furthermore, there are signs, indicating that, what is it really a bubble, when ideology prevails over pragmatism. And if it's a bubble, then, when it bursts, the world will need a lot of gas.