Major global oil companies are upscaling investment in gas development, stressing that the transition to a green future will require much more natural gas. Notwithstanding this position, global fossil fuel consumption is still on the rise, buttressing experts’submissions on its future relevance, MUYIWA LUCAS reports.
There is a growing indication that the era of renewable energy and the conventional fossil fuels will run side by side. While international oil companies (IOCs) are scaling up their investment in the energy transition drive, global consumption of fossil fuel is also increasing, a development that has further buoyed the position of African energy experts.
Despite recent reports that has indicated the huge investment of oil majors in renewable energy, fossil fuel has held its ground in the market as well. A look into recent invenstment and plans for renewable energy transition shows that Shell plans to increase gas investment and would be spending about 25 per cent of its earnigns this year to a record $5 billion and keep spending at that level through 2025.
Last year, Shell joined Exxon Mobil Corp. and ConocoPhillips to invest in Qatar’s $30 billion LNG expansion, the biggest ever in the industry. Gas is also key to Italian energy group Eni SpA’s growth plans that was a big motivation behind its $4.9 billion deal to buy Neptune Energy Group Limited.
Romania’s two biggest natural gas producers agreed this week to invest as much as €4 billion or $4.4 billion in a Black Sea gas project after decades of debate. Chevron and Exxon are adding more staff to build up their gas trading activities in London and Singapore.
In the United States, the development of new Liquefied Natural Gas (LNG) plants is being underpinned as buyers in countries, including Germany and Japan, which have ambitious green goals, sign long-term contracts with exporters. TotalEnergies SE gave a boost this month to plans to build a U.S. export terminal, agreeing to buy stakes in the project and its developer. The French company is also discussing with Saudi Arabia to invest in its massive natural gas project.
Still, there is a debate over how much gas and investment will be needed, with demand likely to hinge on how successful nations are in reducing emissions. The International Energy Agency (IEA) argues gas demand needs to fall dramatically by the end of the decade to keep the world on track for net zero by 2050. The agency in 2021 calculated that all new developments of oil, gas and coal fields need to be stopped to meet that scenario.
To market natural gas as a clean alternative to coal, energy majors are working to cut methane releases. Shell, ExxonMobil and over a dozen other producers aim to achieve near-zero methane emissions by 2030 as part of an initiative launched last year.
“By finally taking the reduction of methane emissions seriously, the majors believe they can thread the needle of making a positive contribution to climate change and keeping their assets commercially relevant,” said Ira Joseph, a global fellow at the Centre on Global Energy Policy, Columbia University
From Shell Plc to Chevron Corp., the world’s top producers plan to accelerate investments in natural gas. China is signing deals to buy liquefied natural gas past 2050, with European importers not far behind. The U.S. is forging ahead with new projects that will make it the world’s top LNG exporter for the foreseeable future.
“LNG sellers look around this market and feel pretty confident that gas demand will be with us for decades to come,” said Ben Cahill, senior fellow with the Centre for Strategic and International Studies, a Washington think tank.
However, irrespective of these staggering investments, global appetite for fossil fuel is still growing despite intensive and sustained investment in the renewable energy space. A report by Statistical Review of World Energy revealed that increases in solar and wind installations in 2022 failed to cut into the massive 82 per cent share of fossil fuels in global energy consumption notwithstanding a turbulent energy market and energy security concerns.
Moreover, another report by Energy Institute (EI) and partners KPMG and Kearney, said that despite the record growth of global solar and wind capacity additions last year, emissions rose again to a new record high and further put the world off track to the Paris Agreement targets. In the latest report by this body, primary energy demand growth slowed last year, increasing by 1.1 per cent, compared to 5.5 per cent growth in 2021, and taking it to around three per cent above the 2019 pre-COVID-19 level. Solar and wind capacity continued to surge, for a record increase of 266 gigawatts (GW) last year. Solar accounted for 72 per cent or 192 GW of those capacity additions.
“Despite record growth in renewables, the share of world energy still coming from fossil fuels remains stubbornly stuck at 82 per cent, which should act as a clarion call for governments to inject more urgency into the energy transition,” said Simon Virley, Vice Chair and Head of Energy and Natural Resources, KPMG in the UK.
As energy demand grew by 1.1 per cent last year, global energy-related emissions continued to grow and rose by 0.8 per cent year-on-year, despite strong growth in renewables.
“Despite further strong growth in wind and solar in the power sector, overall global energy-related greenhouse gas emissions increased again,” EI President Juliet Davenport said.
This is why United Nations Secretary-General Antonio Guterres, earlier this month, warned that producers and financial institutions need to commit to end financing and investment in exploration for new oil and gas fields and expansion of oil and gas reserves. “We are hurtling towards disaster, eyes wide open,” the UN scribe said.
The Group Chief Executive Officer, Nigerian National Petroleum Company Limited, (NNPCL), Mele Kyari, said Nigeria should be allowed to adopt a more gradual and flexible approach to energy transition.
Last year, at the 40th international conference and exhibition of the Nigerian Association of Petroleum Explorationists, Kyari, who spoke on “Global Energy Transition and the Future of the Oil and Gas Industry: Evolving Regulations, Emerging Concepts, and services across Africa in the coming decades’, said: “It is, therefore, our firm position that fossil fuel will continue to contribute more than 50 per cent to the energy mix in Africa and possibly the rest of the world. However, it is important to also consider the competitiveness of the hydrocarbon sources compared to renewal comparatives in terms of cost, energy contents and sustainability.’’
