At Gastech, gas experts differ over future LNG demand

(Houston, Texas) —At Gastech 2024, one of the premier events for the global gas industry, featuring an estimated 50,000 participants, the role of gas was regularly positioned by speakers as critical to the energy transition.

Chevron CEO Mike Wirth made headlines when he blasted the Biden administration for its LNG “pause,” which he said, “elevates politics over progress.” The delay to U.S. LNG would raise costs, undermine energy security, and slow the transition from coal to gas around the world, Wirth said.

But the uncertain business case for gas kept coming up in conversations at Gastech. While many analysts see continued growth for LNG in the years ahead, there was no consensus about how fast and by how much gas use would grow.

A panel of energy ministers from several key developing countries spoke about their respective gas strategies amidst an ongoing energy transition. Nigeria is aiming to export more LNG. Egypt spoke about its aim to become an energy hub in the future, which would entail exporting gas sourced from the broader Eastern Mediterranean even if their own gas production continues to decline. Türkiye is hoping to export more regional gas to Europe. India’s minister said it needs all forms of energy.

But all acknowledged that the transition to cleaner energy is inevitable and already underway. “There is no turning our backs on the green transition,” Hardeep Singh Puri, India’s minister of petroleum and natural gas, said at Gastech. Karim Badawi, Egypt’s minister of petroleum, agreed, saying there “there is no doubt” that the shift to clean energy will continue. 

Although there was universal agreement on the need to lower global greenhouse gas emissions, those rhetorical nods leave a lot of wiggle room, and varying interpretations, over what exactly the future of gas will look like.

At a separate panel, analysts dug into the medium- and long-term demand picture. Ian Nathan, director of gas and LNG research at Energy Intelligence, a consulting firm, said that concerns over LNG demand are “unfounded.”

He noted that the brewing supply surplus that could hit the market in the late 2020s would lead to lower prices, which in turn would make LNG more attractive. Declining gas production in Southeast Asian countries will also compel them to turn to LNG imports. 

LNG will play a “promising role” in Pakistan, said Rahil Ihsan Pitafi, joint executive director of Pakistan’s Oil and Gas Regulatory Authority. But he acknowledged that Pakistan remains highly price sensitive, and that LNG imports have actually declined as of late.

For India, the only direction that LNG demand will go is up, said Kaushal Ramesh, vice president for LNG at Rystad Energy, a consulting firm. He said India’s LNG demand stands at 70 billion cubic metres (bcm) currently, and that will grow to 90 bcm by 2030, and 120 bcm by 2040. Even in a scenario where the energy transition accelerates rapidly, India’s 2040 LNG demand sits at 90 bcm. As a result, gas is “transition-proof,” at least in the case of India, Ramesh said.

However, the potential for LNG to be used in the power sector is “limited.” There is greater use in fertilizer production and compressed natural gas for vehicles. For gas to be used to generate electricity, LNG would need to be delivered at $5 per MMBtu or below, he said, which is not a price that pencils out for most LNG exporters around the world.

Ramesh cautioned that India “is not the new China. Not in any way that we can see.” While demand growth will continue, India will not follow the same trajectory as China, which went through a two- to three-decade period of intense growth.

But not everyone saw a rosy future for LNG demand. Many gas companies and policymakers have referred to gas as a “bridge fuel,” but that bridge is “becoming narrower and shorter over time,” Ira Joseph, a senior research associate at Columbia University, said.

Renewable energy

Cheap and increasingly abundant renewable energy is eating into gas’ market share in the power sector, and falling costs for battery storage are shaving off the need for gas burned for peak daily power needs, he said.

The problems for gas are compounded by the fact that Chinese government policy has viewed renewables, batteries, and electric vehicles as strategic sectors, vital for enhancing power and influence, and not mere commercial enterprises. “Profitability is not an issue here. When you are competing with something where profitability is secondary to politics, it really changes the dynamics,” Joseph said.

He pointed to the explosive growth in Chinese solar panel manufacturing, which could rise to 1,300-1,400 gigawatts. Such levels of manufacturing have sent Chinese solar producers into a tailspin, weighed down by low panel prices. At the same time, that is a boon for solar deployment.

“Every year those panels go somewhere. Every year those panels cut into to some extent the demand growth outlook for a country that is importing gas or importing LNG,” Joseph said.

Chevron’s Mike Wirth argued that gas is offering climate benefits by cutting into coal. But as various analysts noted, LNG will struggle to gain market share in the power sector in many countries.

“You’re trying to sell the most expensive form of gas supply, which is LNG, into the most competitive form of gas demand, which is power generation,” Joseph said.

As a result, forecasts for the growth rate of gas, particularly in power generation, “keep going down, and down, and down.”

Rather than LNG edging out coal, it is coal and renewables that are squeezing LNG, Joseph said. The coal fleet in Asia is relatively young, much of it built in the last two decades.

“Why would you want to switch from coal to LNG, to renewables over time, when you can just kind of run the coal plants a little bit longer and then switch right to the renewables,” Joseph said. “And then you skip the 20 to 30 years of burning gas.”