A world on a 2-degrees Celsius pathway could significantly reduce upstream gas investments by 65% through to 2040, according to global energy consultancy firm Wood Mackenzie's statement on Thursday.
The company’s base case outlook projects that some 200 billion barrels of oil equivalent of new gas resource developments are needed to meet demand through to 2040.
Wood Mackenzie expects major contributors from Qatar with its additional LNG mega trains, the US, Russia and China, also known as the ‘Big 4’. These countries combined currently account for almost half of global gas supply, and are expected to meet 60% of global gas demand by 2040.
Commenting on the statement, Wood Mackenzie Asia Pacific vice president Gavin Thompson said that almost $2 trillion of capital is needed to deliver this growth in supply but a “2-degree demand scenario dramatically alters this outlook, with future supply requiring a more modest, though still considerable, $700 billion of new investment as global gas demand peaks earlier.”
He explained the challenge the industry faces is in increasing scrutiny of gas carbon intensity at a time when sustainable investment is booming and investor activism on carbon has gone mainstream. More fund managers are embracing environmental, social, and governance (ESG) screening, he said, which is shaping investment decisions on future supply.
Senior analyst David Low at Wood Mackenzie added that when considering methane emissions, shale gas is immediately put under the spotlight.
"With a carbon intensity at around 34 times that of CO2, the release of methane, including intentional venting and unintentional fugitive emissions into the atmosphere, is of rising concern to investors," Low explained.
- Three key areas to invest in for low carbon future
Wood Mackenzie believes developers and investors need to consider three key areas – investing in sustainability, increasing competitiveness, and embracing new sources of capital to embrace a low carbon future.
“Sustainability is becoming the mantra across the industry, with carbon mitigation and ESG increasingly at the heart of decision making,” the company’s statement read.
“Some sustainability investments include reduction in venting, leakage and fugitive emissions, use of renewables to power LNG facilities, carbon offsetting, CCUS [carbon capture, utilization and storage] technology for high CO2 fields and liquefaction and partnering with end-users to reduce emissions," according to Wood Mac.
To raise competitiveness, the company advised that future portfolios be founded upon the best assets.
“Suppliers must continue to put pressure on costs, consider divestment and alternative ownership of assets, and develop innovative contracting and enhanced trading capabilities,” it said in the statement.
According to Wood Mackenzie, non-traditional and more diverse investors and partners are creating opportunities for global gas players to push projects forward, while potentially also gaining access to growth markets.
By Gulsen Cagatay