$283bn of liquefied natural gas projects ‘unnecessary’

Approximately $283bn of potential liquefied natural gas (LNG) projects are likely to be surplus to requirements over the next 10 years if the world is to limit global warming to two degrees, experts have warned.

In a new report, London-based analyst group Carbon Tracker found that 16 of the 20 largest LNG groups were studying projects where the extracted gas could never be burned under expected climate change limits.

That equates to $82bn of unecessary potential capital expenditure in Canada; $71bn in the United States and $68bn in Australia. The value of unneeded LNG projects is expected to rise to $379bn by 2035.

“Investors should scrutinise the true potential for growth of LNG businesses over the next decade,” said Carbon Tracker’s head of research James Leaton. “The current oversupply of LNG means there is already a pipeline of projects waiting to come on stream. It is not clear whether these will be needed and generate value for shareholders.”

Looming crisis

The report states that Shell’s agreed $70bn takeover of BG will combine two companies with significant LNG projects over the next decade, making it by far the biggest player in the market. However, Carbon Tracker estimates that $85bn of Shell’s and BG’s potential future LNG project options may not be needed.

Shell was identified by Carbon Tracker last year, as a company that is ‘overvalued’ by the financial markets due to having large fossil fuel assets and high-carbon projects in the pipeline. A spokesperson for Shell told the Guardian that it expected global energy demand to double by 2050, and that all types of fuel, including LNG would be needed.

Complex fuel

Gas has been perceived as the cleanest fossil fuel and huge investment has poured into developing new gas supplies. The study analyses projects that companies are considering but have not yet made final investment decisions on.

Mark Fulton, advisor to Carbon Tracker and a co-author of the report, said: “Natural gas is complex when seen in the context of a climate-constrained world.

“It can deliver better outcomes than coal, but gas must continue to work on reducing its fugitive emissions and there is a possibility that if it reaches too large a share of the energy mix then in the longer run this could still be incompatible with a 2⁰C outcome.”

A recent report from the New Climate Economy found that the leakage rate of natural gas is around 1%. Methane – the main ingredient of natural gas – has a global warming potential 34 times higher than carbon dioxide. That report also warned that gas is a ‘very risky’ way to clean up the planets energy supply.

Brad Allen

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