Energy Transition Scenarios: Impact on Natural Gas

OIES has developed three scenarios considering the impact of the energy transition on natural gas. The control scenario – Declared Policies – sees global gas demand peaking around 2040, but this is not a decarbonisation scenario. The Net Zero scenario achieves net zero across the board everywhere by 2050 but with a significant volume of carbon capture and storage (CCS) supporting gas demand at a higher level than in the IEAs net zero scenario (IEA NZE). An alternative Fragmented scenario envisions a multi-paced world with some countries/regions more committed to decarbonization than others. There is still significant CCS which is required to maintain a reasonable level of gas demand. At COP28, the prospect of the use of fossil fuels as transitional fuels was recognised. In that respect, it could be argued that the fragmented scenario is much closer to the COP28 outcome, with natural gas being a transitional fuel. In all three scenarios LNG trade peaks around 2030. In Declared Policies, LNG trade declines gradually in the 2030s and 2040s, principally due to China demand peaking and declining. In the Net Zero and Fragmented scenarios LNG trade falls significantly impacting LNG exports from North America, ASEAN and Australia disproportionately. A key conclusion is that if natural gas is to remain a major fuel in a rapidly decarbonising world, then the industry needs to invest in an enormous quantity of CCS. The alternative is rapid decline, as in IEA NZE.

By: Mike Fulwood