Page 29 - Energize June 2021

VIEWS AND OPINION

Natural gas: Bridge to nowhere?

by Fereidoon Sioshansi, Menlo Energy Economics

ntil recently many in the energy business viewed natural gas as a convenient bridge to the
future using existing technology and plentiful gas to cut emissions almost in half – simply
Uby converting coal-fired power plants to gas. Since there are many such plants around the
world, the thinking went, a lot could be achieved quickly and inexpensively – relative to virtually
any other option. But as the drive to a low carbon future gains momentum, many have changed
their minds.
Why bother switching from coal to gas when in a few years’ time emissions from natural
gas fired plants will have to be curtailed? The bridge to the future has turned into the bridge to
nowhere. Granted, natural gas is half as bad as coal per unit of electricity generated, but that does
not make it good.
This reality has turned natural gas into a tricky commodity with significant implications for oil
and gas majors, especially when it comes to future investments in exploration and production of
expensive infrastructure for liquefied natural gas (LNG), once believed to be the fuel of the future. Fereidoon Sioshansi
While existing fields and facilities may be used and useful in the short-run, investments in
longer term expansion seem decidedly risky.
The Economist (24 Apr 2021) for example, observed, “As the energy transition gathers The International Energy Agency’s
momentum, no fuel’s future is hazier than that of the least grubby hydrocarbon.” latest report is unequivocal in stating that
The Economist describes how a mad dash for gas by the oil majors between 2008-2014 all future investments in fossil fuels must
went bust resulting in the big recent write-downs. The biggest 5 among the global oil majors, end immediately if we are to avert a climate
ExxonMobil, Chevron, Shell, Total and BP, shifted their hydrocarbon portfolios from 39 to 44% catastrophe. For natural gas, the bridge to
between 2007 and 2019. the future has turned into an expensive and
More recently, however, they have been forced to write them down, losing billions. The most risky trap.
dramatic was Exxon’s $41 billion investment in XTO Energy in 2010. The Economist called it “the
worst-timed investment made by an oil major in the past 20 years.” Acknowledgement
Lately, interest in natural gas has turned into anxiety as uncertainties about the future demand This article was first published in the May
and the price of carbon has made investors wary. As noted in the lead article, virtually all investors 2021 edition of EEnergy Informer and is
are assuming higher numbers for the cost of carbon in making future plans – for hydrocarbons or republished here with permission.
otherwise.
If one takes the recent pronouncements of governments on getting serious to fight climate Send your comments to
change at face value, all fossil fuel investments are risky and will be more so in the future. rogerl@nowmedia.co.za

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