Natural gas is increasingly being embraced around the world as a “bridge fuel,” but there is broad disparity on what that means when viewed at a regional and national level, a new report from the Energy Futures Initiative (EFI) highlights.
The report from the EFI, a not-for-profit research group founded in 2017 by former US Secretary of Energy Ernest Moniz, comprises largely the thoughts of more than 200 experts from various backgrounds in energy, research, policy, economics, and other areas who participated in eight regional workshops held over the past year.
The focus of each workshop was to summarize current and potential plans to address the “tensions” that exist between rising global demand for natural gas and its role in climate change. The outcome from those thinking sessions is a sweeping tableau of nuanced drivers for future demand—including demographics, economic trends, and policy priorities—that are distinctive to every region.
In many respects, the biggest lines of demarcation appear to exist between the world's mature industrial economies, which are also experiencing stalling population growth, and those whose economic potential remains on the ascendance and whose populations continue to swell.
"In the developed world in particular, natural gas may be seen as an enabler of—and complement to—decarbonization. For example, natural gas can support the electric grid’s deployment of intermittent renewables for power generation. In Europe, northeast Asia, North America, and other regions adopting or moving toward net-zero emissions targets, any continued natural gas use will require accompanying carbon capture or alternative emissions abatement technologies," the report found.
It continues: "In the developing world, natural gas may be viewed as a next step for energy and economic development, improving grid reliability, and managing local air quality issues."
More Key Regional Viewpoints
- Natural gas remains competitive in south Asia as an alternative to coal-, oil-, and nuclear-based power generation. One of the most notable exceptions inside the region, though, is India where natural gas makes up only 6% of the energy mix vs. coal which stands at 70%. Despite the country’s soaring energy demand, gas consumption in India may be constrained because it is viewed both as too expensive relative to coal and too carbon intensive relative to renewables. This suggests the world’s second largest country in terms of population will wait for the cost of renewables to drop rather than invest in the infrastructure needed to deliver the gas to industrial and population centers.
- Northeast Asia, represented by China, Japan, and Korea, is already the world’s top destination for liquified natural gas (LNG) shipments and will continue to increase its demand in order to replace coal-fired power generation, and to a lesser degree nuclear. The biggest unknown involves China’s net-zero ambition, which will require a wholesale transformation of its power grid that today is 77% reliant on coal. Some experts in the study expect China’s natural gas demand will continue to swell beyond 2050, while others expect a burgeoning domestic renewable market to usher in peak gas demand by around 2030.
- Southeast Asian countries, many already facing bottlenecks at LNG regasification plants, are expected to continue to be a major driver of natural gas demand in the years to come. This is in spite of the region’s general reluctance to retire or convert coal-fired gas plants ahead of their originally planned decommissioning schedules. In many cases, new coal-fired plants are falling out of public favor, which brightens the outlook for gas-to-power projects regionwide. Floating LNG is also seen as a regional enabler, making it more affordable to address growing demand with local, but marginal offshore resources.
- Sub-Saharan Africa is chiefly an exporter of natural gas today, but its growing population has stirred greater interest in expanding its role as a consumer. Future gas demand is projected to be led by nations along the northwest and southwest coasts of the continent, along with major contributions from Kenya, Uganda, and Rwanda. Experts in the region also consider it to be mostly unbounded by the emissions constraints facing more industrialized regions since “even a very large increase in the use of natural gas” would offset more carbon-intensive diesel and biomass fuels while having a minimal impact on global emissions.
- Natural gas accounts for about a quarter of Europe’s energy mix and will remain at or near that level for the rest of the decade. After 2030, the continent must start reducing natural gas consumption in order to meet emissions targets. As that takes place, the continent could see its gas production shrink by 20%, which would increase its reliance on outside supplies as it makes a transition toward lower-carbon alternatives.
- In the Middle East and North Africa, natural gas will continue to be a major source of power generation, but there is general optimism that demand growth will also be sustained by using natural gas as a feedstock for hydrogen and ammonia. Notably, these nascent sectors are being developed primarily by Saudi Arabia, Qatar, and the UAE to support exports instead of domestic energy demand.
- In South America, it is expected that the ongoing effects of climate change will result in accelerated glacial melting which will dwindle the continent’s hydroelectric capacity. This and high electricity prices were considered to be potential drivers for increased natural gas consumption in South America. Outside of Brazil and Chile, rising demand would otherwise buck a historical trend demonstrated by many countries in the region of prioritizing renewable energy projects over natural-gas-to-power investments.
- The North American outlook for natural gas demand is expected to be strong through 2030 as demand for LNG enjoys a steady uptick. One of the threats weighing on the longer-term outlook involves consumer concerns over the emissions associated with natural gas production. This has prompted producers to adopt systems to certify that their gas is sourced with a lower footprint, potentially creating a differentiated market for emissions-minded consumers. In terms of using natural gas to produce more hydrogen, regional experts were in general agreement that increasing such efforts must move in tandem with carbon sequestration which, despite tax incentives, continues to face uncertainty in terms of scalability.
Access the full report and additional regional insights here.
