Is there a future for LNG?

The debate is about what energy mix will be needed at different points in time. Will we use renewables and how much? Will we use LNG in 10 years? And in 30 years?

It is clear we need natural gas today to generate enough electricity with relatively low carbon emissions. The supporters of a quick change to renewables believe we will not need LNG, coal or nuclear in 5 or 10 years. But, is that reasonable? I don’t think so. Moving from today’s energy mix to full renewables is not feasible in most parts of the world, whatever the politicians and well-intended customers think.

And I am not alone: Shell’s chief executive’s new strategy sees a long-term future for natural gas. Obviously, Shell has its own interest in guaranteeing the profitability of its assets, but in recent declarations, he has stated they see LNG playing a long-term role in the global energy mix and are planning no production cuts until well after 2030. Interestingly enough, after those declarations, Shell boosted its dividend 15% as it pivots back toward oil and gas.

At the same time, the Japanese Institute of Energy Economics has warned Europe of being too optimistic about the role renewable energies will play in the future in the European energy mix. Moving too fast towards renewable energy might cause massive problems in the continent in the medium term. Not only because of the inherent risks of putting all the eggs in one (or two) baskets or even relying completely on technologies that still have to prove they can sustain a long-term growth, but because that might mean the Continent would reduce its weight in the international LNG market and will not be able to guarantee supplies as easily as it did during the Ukrainian invasion in case of a new crisis.

In the meantime, the Chinese have decided to act instead of talking and ENN of China has just signed a 20-year LNG supply contract with US-based Cheniere.

Decarbonisation is urgent, I agree. We are living in the middle of a climate emergency that requires urgent measures. But we also have to be realistic and aware of the consequences of every decision and the timing of those decisions. Ukraine has shown the European Continent is not as energy secure as we thought and we have to give credit to natural gas and LNG for what they are: a transition energy source that will be required for a while. Others will take over but the timing is not as clear as some propose. As Bill Gates once said, “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next 10. Don’t let yourself be lulled into inaction.”

My biggest fear is that moving out of natural gas and LNG too soon might take us back to coal and nuclear power generation. That means high carbon emissions and dirtier and extremely dangerous radioactive waste.

Let’s keep LNG for now.