Despite predictions that the energy transition would diminish the demand for hydrocarbons, particularly oil and coal, recent trends indicate that demand for natural gas is actually on the rise. Major oil companies are now focusing more on their liquefied natural gas (LNG) operations, a shift that has drawn criticism from advocates of renewable energy sources. According to CNBC’s Sam Meredith, the latest quarterly reports from leading oil firms underscore the growing importance of LNG in their business strategies.
Major Oil Companies Pivot to LNG
The world’s leading oil companies are doubling down on their LNG investments. Shell announced plans to increase its LNG capacity by 12 million tons by 2030, while TotalEnergies is set to enhance its LNG management by 50% during the same period, pursuing both project development and trading with other producers. BP has initiated a new LNG project off the coasts of Senegal and Mauritania, aiming to make these nations a significant LNG hub. Similarly, ExxonMobil and Chevron are expanding their LNG assets, with Exxon targeting a 50% increase by 2030 and Chevron planning further global expansion.
This pronounced focus on LNG comes despite forecasts indicating that demand for natural gas may peak before 2030. Critics point to the International Energy Agency (IEA) and various climate-focused organizations as sources of these predictions. Yet, the IEA’s latest report suggests that global demand for LNG is expected to grow further, anticipating a 2% increase in demand growth by 2026. The report notes that LNG supply is set to rise by 7%, or 40 billion cubic meters, marking its largest increase since 2019.
Data Centers Drive Electricity Demand
As electricity demand rises, particularly due to advancements in artificial intelligence, the current energy landscape is proving more complex than anticipated. The IMF highlighted that electricity consumption by data centers is projected to match that of India by 2030, surpassing demand from electric vehicles. This surge in demand necessitates a reliable and dispatchable electricity supply, which is not consistently provided by wind and solar power.
Natural gas, along with coal and nuclear energy, is viewed as a crucial source of this reliable electricity. The European Union’s carbon dioxide emissions saw a 3.4% increase in the first quarter of the year, coinciding with a 1.2% economic growth rate. This rise in emissions can be traced back to greater reliance on gas and coal for electricity generation, as wind and solar resources failed to meet expectations during the same period.
The persistent growth in natural gas demand raises questions about the feasibility of achieving the ambitious goals set forth by the energy transition. While the pursuit of renewables remains essential, the realities of energy consumption patterns suggest a need to reassess these targets. As companies continue to invest heavily in LNG, it becomes increasingly evident that the transition may not progress as swiftly as once envisioned, potentially necessitating a revision of long-term energy strategies.
In light of these developments, the energy sector is at a crucial crossroads. The focus on LNG could provide a pathway for both economic growth and energy reliability, yet it remains to be seen how this will align with global climate objectives.
