The falling renewables costs will render a great number of liquefied natural gas (LNG) projects unprofitable in the long term and put much of the $1.3 trillion currently invested in globally expanded projects at risk, a report by Global Energy Monitor released early this week revealed.
According to the California-based research institution's recent report; The New Gas Boom: Tracking Global LNG Infrastructure, through a massive increase in portside infrastructure, floating offshore terminals, and oceangoing LNG vessels, the natural gas industry is seeking to restructure itself from a collection of regional markets into a wider and more integrated global system.
If successful, this transformation would lock in much higher levels of natural gas production through the mid-century, the report said.
Although growing production is seen a big win for the gas industry, the falling cost of renewable alternatives could make any of these projects in the LNG sector unprofitable in the long term while putting the majority of the $1.3 trillion worth of investments in the global gas expansion at risk.
"Renewable energy has entered a virtuous cycle of falling costs, increasing deployment and accelerated technological progress. Solar PV module prices have fallen by around 80% since the end of 2009, while wind turbine prices have fallen by 30–40%," according to data of the International Renewable Energy Agency.
"Such an expansion is also incompatible with the International Panel on Climate Change's warning that, in order to limit warming to 1.5°C above pre-industrial levels, gas use must decline 15% by 2030 and 43% by 2050, relative to 2020," the report highlighted.
A big part of the LNG capacity is underway, driven by the North American fracking boom and Asian gas imports, according to the report.
In that respect, at least 202 LNG terminal projects are in development worldwide, including 116 export terminals and 86 import terminals.
"The projects would triple global LNG export capacity. Export terminal development is concentrated in the U.S. and Canada while import terminals are in development in 42 countries of which 22 have no current import capacity," the report said.
The U.S. leads in LNG investments with $507 billion, followed by Canada with $410 billion and Russia with $86 billion.
Among the top 10 investing countries is Australia with $38 billion, Tanzania with $25 billion, China and Indonesia with $24 billion each, Mozambique with $23 billion, Iran with $21 billion, and Papua New Guinea with $17 billion.
"Since only 8% terminal capacity under development has moved past the final investment decision stage into construction, there is still the opportunity to avoid overbuilding," it stated in the report.
By Nuran Erkul Kaya