Gastech: A Thriving Gas Sector, If You Can Keep It
Gastech, the annual global natural gas powwow that just wrapped up after three days in Houston, Texas, showcased a thriving industry that has benefited from great technological breakthroughs in recent decades. Hydraulic fracturing and liquefication are the two key technologies boosting the industry. While America considered importing liquified natural gas at the start of the millennium, today, the U.S. is the dominant exporter of LNG , bigger than Australia and Qatar.
"The LNG market will grow, as electricity demand will go up 15 percent by 2030 due to the rise of AI alone", said Musabbeh Al Kaabi, Executive Director of the Low Carbon Solutions & International Growth Directorate of the Abu Dhabi National Oil Company , ADNOC, addressing the conference. Analysts told me that we still do not fully understand how fast AI will grow and how it will affect power generation and the grid load. Yukio Kani, Global CEO and Chair of JERA , a huge Japanese utility, projected significant demand growth in Japan because of increased semiconductor manufacturing and the proliferation of data centers.
Gas is increasingly a commodity tradeable worldwide. Corporate and government leaders flooded Houston, from China, India, Europe, Africa, and the Middle East. The economic crosscurrents caused by the decoupling from China, the decline of Russian hydrocarbon exports, friend-shoring, the rise of AI, urbanization, and Africa's ascendancy were palpable in the conference debates.
The global trend toward urbanization and the population of emerging markets playing catch up with the OECD-developed countries means the world is adding tens of millions of refrigerators, air conditioners, TVs, computers, and other appliances. Then there are projections for electric car growth, another megatrend driven by decarbonization.
"Forty percent of the world's population lives below the 'energy poverty line'," said Andrew Barry, VP of Global LNG Marketing at ExxonMobil. In addition, population growth in Africa, where an estimated 30 million people a year are added , puts additional demand on power generation. Sixty-four percent of Africans rely on wood for food preparation, with its attendant pollution and environmental damage, John K.A.A. Sanie, Ghana's Deputy Minister of Energy, noted. And Libya, a North African oil and gas producer caught in decades of post-Qaddafi strife, flares large amounts of its gas though it plans to end flaring by 2030, promised Khalifa Abdul Sadiq, Minister of Oil and Gas.
Barring short-sighted blocks and bans on fracking or future LNG infrastructure America can support its allies and other customers with gas exports and pocket hundreds of billions of dollars in revenue and taxes. Jack A. Fusco, President and CEO of Cheniere , a pioneer exporter of American LNG, which sells eight percent of US-produced gas, pointed out that Presidents Obama, Trump, and Biden all promoted US LNG exports. "I want to believe that President Harris, if elected, will do the same. From a societal perspective, she needs to support fracking. Innovation unleashed major gains for America," he added. As for Harris' support of fracking, "Maybe she means it," Fusco said. "I have to trust it."
There were several important take-homes from Gastech based on conversations with senior corporate executives, government leaders, experts, and journalists. First, while it is happening, the green transition to renewables may take a few extra decades. As long as the weather drives power generation from solar and wind, and as long as the sun doesn't shine at night, green electricity from renewables will require massive amounts of storage — be it " pumped storage " or pricey lithium-ion batteries. For now, the capacity is not there yet, and when it is, it raises the costs of green energy significantly.
Second, there is hope for green ammonia (NH3) produced through electrolysis to play an important function in the storage of renewable energy, but currently, the prices are uncompetitive , particularly compared with pumped storage. To date, executives believe green ammonia and hydrogen are not a threat to LNG, but this may change after 2040 when hydrogen may become cheaper, and gas demand will start declining.
Hydrogen may be today where fracking was in 2006. We don't have clear business models or tech standards, but they will come. We may see another important new industry emerging in the energy sector, with hydrogen making companies rich just as fracking and LNG did.
Third, eventually, more CO2 emissions may be sequestered, but it is important to move from coal and fuel oil to gas while continuously working on sequestration tech, standards, and trading. The U.S. Treasury established the Section 45Q Tax Credit for Carbon Sequestration , but it is not globally agreed upon. Available tech is varied and often not profitable. In the meantime, many companies and their executives, like Meg O'Neil, CEO of Woodside Energy , are interested in planting millions of trees to provide a natural pathway to carbon capture.
Fourth, the developed world's regulators will pressure gas producers to clean up their act and reduce methane emissions at the well and along the pipelines. Expect tighter standards and higher fines. Unfortunately, EU regulators tend to overregulate, "not only telling us where to go, but how to get there. It is often nonsensical, heavy-handed and counterproductive," a European CEO told me. The executives are ready to do more to capture and process methane to keep the goose that lays the golden eggs of profits alive.
Finally, while natural gas has a growth upside, replacing coal and reducing carbon emissions, especially in the developing world, it may be approaching its peak in mature markets. Western European LNG infrastructure is at capacity. Yet, in policy-making centers such as Washington and Brussels and in emerging markets, the natural gas industry can and should do a better job of highlighting the environmental and business cases for substituting for highly polluting coal.
China is a massive polluter with a gigantic coal sector. Only 9 percent of its power generation is from gas, while Europe is at 23 percent . China is bringing 32 gigawatts of coal-fired capacity online every year, spewing billions of tons of CO2 into the atmosphere and contributing to climate change. China is the world's largest importer of oil and gas, with 200 million tons of LNG projected for import per year by 2030.
By 2030 India will increase its gas-generated capacity from 6 percent of the total to 15 percent, addressing the current pollution problems.
Gas-fired power plants are the principal providers of the energy baseload regardless of the wind speed, cloud cover, or time of the day or night, so long as the capex-heavy, irrationally feared, and the over-regulated nuclear industry has a hard time catching up with the new generation of safe and affordable reactors, including small modular reactors. Gastech proves that the industry will continue to develop and thrive, fueling our economic growth while finding sustainable solutions to reduce carbon emissions.
