Our Climate Fight Begins With Exporting U.S. Natural Gas To Displace Coal
Not surprisingly, natural gas emerged “largely unruffled” at COP26 because policies for cleaner air and cutting greenhouse gas emissions to fight climate change will continually support its use.
Having 50% less CO2 emissions than primary competitor coal, gas will also remain the key backup fuel for the natural intermittency of wind and solar power.
The U.S. Department of Energy modeled in October that global gas demand will soar over 30% to 186 trillion cubic feet by 2050.
The trade of liquefied natural gas (LNG), of course, has been deemed as the fastest growing commodity, and Morgan Stanley says that global LNG demand could rise by as much as 50% by 2030.
For reference, at almost 50 Bcf/d, LNG now accounts for 13-15% of the world’s gas market.
The evolution of gas displacing coal in overwhelmingly coal-based China and India is our most essential goal in the fight against climate change.
In the U.S., for instance, a 2020 study from the University of California, San Diego (shout out to my former employer!) found that closing hundreds of coal power plants and replacing them with natural gas ones has saved thousands of lives across the country.
Dependable, abundant, and affordable, BP’s Statistical Review of World Energy 2021 reports that the world has ~6,645 trillion cubic feet of proven natural gas reserves, or a 35-40% jump from 2000.
Along with more suppliers such as the U.S., this expanding sea of available gas is bolstering huge demand growth around the world.
China will grow its gas network by 60% by 2025, and India is planning to double the length of its gas transmission grid.
For the U.S., where the shale revolution has made gas prices some of the lowest in the world, S&P Global tracks 45 new gas pipelines coming online over the next five years, and 16 of them are tied to LNG export terminals.
The largest gas producer (~94 Bcf/d) and the growing LNG exporter (9-11 Bcf/d of LNG today), the U.S. now has six LNG export terminals, and that is expected to at least double over the next few years.
Estimates from our Department of Energy generally have new U.S. gas production outpacing new U.S. demand by a 2-1 margin, leaving plenty left to export.
And far more Democrats support U.S. LNG displacing coal globally than many want you to know: “DOE Secretary Designate Granholm Signals Support for U.S. LNG Exports.”
We are beating our primary “preferred global supplier” competition that also offer democratic, politically-unattached, cleaner, and more predicable supply by the best energy companies in the world.
Namely, the U.S. accounts for over 40% of the global LNG projects waiting for a final investment decision, with Canada at around 25% and Australia at just 5%.
And from a moral perspective, U.S. LNG exports help alleviate worsening global energy poverty.
Although I am sure well-intentioned, these COP climate summits have become notorious for always ignoring the elephant in the room: abject poverty enabled by energy deprivation.
We in the West are “full energy-rich,” and simply do not have to see the world’s biggest problem: the vast majority of the world is “no energy-poor.”
The pushback on LNG exports by our domestic users is short-sighted: exports make our gas industry stronger by incentivizing more production and new pipelines.
Our industrial groups and politicians trying to block LNG exports are not thinking deep enough: somewhere, Adam Smith is shaking his head at them.
A key study just explained this for oil: “IHS Markit: Banning Exports of US Crude Oil Would Likely Raise Gasoline Prices, Not Lower Them.”
The rise in U.S. gas prices since June are not the result of higher exports but come more from the media, traders, and oil experts (the latter limited when talking about gas because gas, unlike oil, is NOT a global commodity but still a globalizing commodity) creating a link between the two (Figure 1).
In other words, Asian and European prices recently spiking to above $50 should not have spiked our own prices because our exports have been high but mostly flat for months on end – with LNG terminals running at near-full utilization.
Even with global gas prices hitting record levels, there has been no sudden jump in U.S. exports to increase our own prices since we have had no ability to export more.
Power generation, industry (e.g., manufacturing), and LNG as a bunkering fuel for ships are all high-growth opportunities for natural gas – where gas is being utilized more to displace higher emission fuels.
In fact, this year’s global energy crunch and spiking prices are causing many LNG buyers to seek long-term contracts to ensure future gas supply, as consumption will be mounting much higher than some what you to know.
In another example of the ongoing importance of U.S. gas, Venture Global LNG just announced a 20-year supply deal with China’s Sinopec worth a whopping $30 billion.
India has also been taking in a record amount of U.S. LNG, with our sellers always chasing the vital flexibility to mix both longer- and shorter-term contracts to entice new customers.
China and India are firmly in the “too big to fail” category, having great expectations for their demand growth over the coming decades under any circumstances.
S&P Global confirms the real takeaway from COP26: “More climate finance, less coal could send U.S. natural gas exports skyrocketing.”
And for any buyer, the larger our LNG deals are the more we are helping to slash future potential CO2 emissions.
Being realistic on energy policy means recognizing that “anti-gas” positions truly are just “pro-coal” positions.
We are running out of time: Bloomberg reports that global CO2 levels have returned to pre-pandemic levels.
Electricity demand in the still developing world (over 6.7 billion humans) is rising so fast that even a strong uptick in gas usage (Figure 2) still has gas losing market share to main power source coal (Figure 3).
The rich, fully developed West (OECD) has provided the example for the gas-displacing-coal evolution for power generation.
And remember that the International Energy Agency has credited this displacement of coal with gas for why the U.S. has been the climate leader in slashing CO2 emissions the most of any country – without the business stifling regulations and crazy high prices that Europe is failing with.
Climate conferences like COP26 never turn out as hoped for because of a single fact: 85% of the world is poor and much more energy is required – and it must be low-cost and reliable because human development takes priority.
Coal is over half of the energy utilized in some of these poor countries and over 60% of the power, so the Western-made mandate of “only wind, only solar” is a solution for absolutely nothing,
Already bombarded by the ongoing economic destruction of Covid-19, nor is the Intergovernmental Panel on Climate Change’s carbon tax recommendation of $200 per ton and rising to an outlandish $27,000 per ton by 2100.
Indeed, as for relying so heavily on weather-dependent energy, Brazil is currently showing a gigantic problem for politically-favored renewables: climate change is making them even less reliable.
In a changing climate, more emphasis on weather-dependent energy actually means MORE, not less, natural gas.
Hydropower is both far more established and dependable than wind and solar yet climate change is making it less available to generate electricity.
With hydropower generating over 75% of Brazil’s electricity, climate change has the country struggling through the worst drought in a century.
This has left Brazil as the largest U.S. LNG importer for three straight months.
For all of these reasons, a central climate focus of ours must remain: always emerging gas technologies as a centerpiece strategy for the low-carbon energy transition.
For natural gas, here are just a few of the suite of options that net-zero goals will require:
Carbon capture and storage has become a focus of the gas industry, including for the huge LNG build-out.
Gas transport and storage infrastructure can be readied for hydrogen blending, and for pure hydrogen transport, at a much cheaper cost than building new purpose-built hydrogen networks.
As I have already explained, carbon-neutral LNG is showing just how innovative the industry continues to become to enhance sustainability and ESG positioning.
Project Canary and “Responsibly Sourced Gas” are game-changers and will ensure gas as a go-to fuel in a decarbonizing world, also making the U.S. even more of a “preferred global supplier” for natural gas.