Oil, gas, and LNG weaving energy security web

Despite the winds of change, which are still gathering speed as they blow across the global energy industry, oil and natural gas have not been dislodged from their top spots in the energy mix. These fossil fuels, alongside liquefied natural gas (LNG), are keeping their finger on the pulse of the worldwide energy security life force as vital signs of strength in countries’ energy flows.

However, the widespread low-carbon and clean power quest has left its mark on the offshore oil and gas industry, as more and more players take decarbonization steps to curb their greenhouse gas emissions footprint and enable low-emission and even zero-emission energy.

Analysts argue that some countries worldwide are way ahead of their time in reaching for the green and clean energy moon to quicken the energy transition pulse, which leaves them running around in circles without pulling out all the stops to bring the energy security era to life.

While some think a world run on renewables is a pipe dream, others have made it their life’s mission to enable such a future to become a reality. Countries like Norway are more pragmatic and want to see oil and gas thrive along with renewables and other low-carbon energy sources. The Netherlands seems to be thinking along the same lines, with gas getting special attention alongside some other low-carbon and green energy plays.

Navigating the treacherous energy security waters against the background of net zero waves with oil and gas cast adrift is not just an uphill battle, but also a slippery slope leading the global energy mix to ruin due to supply shortages such moves would provoke, according to some analysts, who believe oil and gas will continue to be the security of supply pillars for decades to come.

Regardless of where they stand on the issue of prolonged use of oil and gas after 2050, most tend to share the same view about the need to decarbonize these fossil fuels to slash their GHG emissions and enable more sustainable operations to tackle climate change woes.

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Similarly, David Whitehouse, Offshore Energies UK’s Chief Executive, who is advocating support of a homegrown energy future, highlighted: “The North Sea, its people, skills, and companies, are a strength and remain a vital part of our energy ecosystem our world class supply chain companies use the revenue from oil and gas activity to invest in our energy future.

“A homegrown energy future. But that ecosystem, as we have made clear, is under threat. […] This is not just about energy. It’s about safeguarding our economic security, fulfilling our environmental responsibility, and protecting our national sovereignty. It is about ensuring that the UK remains a leader, not a follower.”

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A multibillion-dollar gas development project – part of an ADNOC-operated concession deemed the world’s largest offshore sour gas development – is among the projects that made inroads last year and which incorporate decarbonization technologies within their development plans, This project hit a construction milestone in 2024, as the first steel was cut for the project’s subsea structures.

Based on the UAE operator’s data the project will tick off many firsts on the global energy wish list, presenting it as the world-first gas project aimed to operate with net-zero emissions, the first oil and gas project on the globe that will have a 100% unmanned operation for offshore facilities, and the first development in the oil and gas industry, where an integrated project delivery (IPD) approach was implemented from the concept phase to the execution phase.

This project has been envisioned to push the boundaries and step into uncharted waters to reach greener shores by navigating the familiar peaks and valleys of low-carbon shifts through digitally optimized terrains. To turn its low-carbon mission concept into reality, ADNOC will bundle advanced technologies into one integrated solution to capture 1.5 million tons per year of CO2 while producing low-carbon hydrogen, which can replace gas as fuel to accelerate emissions reduction.

The mega undertaking is anticipated to throw clean energy into the mix to enrich the gas development with nuclear and renewables, empowering the UAE player’s decarbonization mission and enabling the huge natural gas project to reach its vision of operating with net-zero emissions.

ADNOC is not the only player with a multi-energy strategy, as many energy giants have dipped their tools into the same and similar on/offshore plays. In line with this, TotalEnergies has set its cap on a $80-$90 billion investment from 2025 to 2030 to up its multi-energy transition strategy game to bolster its portfolio with electricity, primarily from renewables and more oil and gas, especially LNG, which it considers as the linchpin and cornerstone of its efforts.

To achieve its energy growth and sustainability goals, the French energy heavyweight will spend approximately 27.8% of the total investment planned for the five-year period, which amounts to $25 billion, on low-carbon energies.

Since the company sees natural gas as the crux of its energy transition strategy, it considers LNG as an essential element in its quest, thus, it is anticipating a growth of over 50% during the 2024-2030 period with a gas-to-power integration working in favor of its “profitable integrated power strategy to complement the intermittent renewables.”

While highlighting the need to invest in not only oil and gas but also low-carbon endeavors, the firm backs energy analysts’ expectations of Asia becoming the energy markets’ new capital playground since it also sees the continent as the center of energy growth, with “major opportunities” for a global multi-energy company.

While TotalEnergies is confident in the opportunities the region offers for renewables’ growth to meet the increasing power demand due to population growth, it also emphasizes that LNG will take on the main transition fuel role to replace coal in power generation.

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Given that around 70% of global LNG market demand is forecast to come from Asia, the French giant believes the continent will have a key role in absorbing the incoming supply set to flood the market. Given the changes in energy policy, QatarEnergy‘s CEO sees the EU’s set of measures aimed at propelling the region’s net-zero journey forward as potential pitfalls that may cause European companies to seek new business playgrounds to sidestep the new penalties related to decarbonization and energy transition advancement noncompliance.

In addition, his remarks seem to indicate that this could damage the EU’s economy by discouraging investment and also impact the region’s energy security. In contrast, the firm’s CEO showed no alarm over the U.S. President Donald Trump’s zest to unleash golden era of oil and gas and cut the U.S. LNG export red tape, creating more competition within the LNG market.

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Eurogas underlined a few months ago that additional U.S. LNG projects were needed to lend a helping hand in shoring up Europe’s energy security, after the Ukraine crisis triggered “an unprecedented energy crisis, highlighting Europe’s vulnerability to its dependence on Russian gas imports.” The industry body’s recent report spotlighted gas’ ability to support the energy system’s affordability, security, and sustainability, enabling Europe to come to grips with the energy trilemma.

In line with this, Eurogas recommended to EU leaders to take measures to maximize the potential of biomethane, as a “must-have” option to serve remaining methane demand; build a value chain for hydrogen and its derivatives to allow them to become a key energy carrier in the long-term, predicting exponential growth of green hydrogen after 2040.

It also recommended EU to enable carbon capture and storage (CCS) as “a necessity for achieving sustainability and energy security objectives in Europe;” repurpose existing gas infrastructure for renewable and low carbon gases, as gas and hydrogen infrastructure remains “a backbone of the European energy system;” and leverage domestic natural gas and biomethane resources, as recommended by REPowerEU and the Draghi Report.

“The global LNG market remains tight and global LNG demand is foreseen to increase at 5+% per year during the 2024-2030 period. While Europe has made significant progress in mitigating price volatility, including through collaboration with the United States and other like-minded countries, the global LNG landscape remains highly competitive,” added Eurogas.

“This intensifying demand is placing pressure on existing industry trade chains, and future supply availability hinges on the timely expansion of production capacities globally, including in the United States. If additional LNG export capacities don’t materialise it would risk increasing and prolonging the global market imbalance. This would inevitably impact supplies in Europe with the consequent implications that would have for the economy and society.”

A study titled ‘Ensuring Resilience in the European Energy Transition: Strategic Use of Gases to Deliver EU Climate Ambition,’ is said to hammer home the importance of natural gas, renewable, and low-carbon gases in delivering Europe’s net zero energy transition by 2050. The report’s findings indicate that gases will “remain crucial in final energy demand” over the years, while hydrogen and its derivatives are forecast to have the potential to emerge as the second-largest energy carrier, with biomethane gradually replacing natural gas in energy consumption.

In addition, the report claims that gases will be even more crucial if deviations from desired transition pathways occur, as gases are said to build the resilience of Europe’s energy system. As a result, Eurogas urged European leaders to take immediate action to deliver “essential gases on time,” focusing investment and policies on rapidly phasing in renewable and low-carbon gases and using existing infrastructure.

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Andreas Guth, Secretary General of Eurogas, commented: “A successful energy transition in Europe relies on striking the right balance between affordability, security, and sustainability – a balance that gases are uniquely positioned to achieve.

“Natural gas, renewable and low-carbon gases are essential to a resilient energy system that not only safeguards Europe’s industrial competitiveness and stabilises energy prices, but also provides the flexibility needed to adapt to evolving circumstances as we move towards net zero.”

The Association of the Gas Infrastructure Operators of Europe claims that flexibility and optionality enabled LNG to turn into “an increasingly important supply source for Europe in a volatile environment,” with LNG terminals given “a key role in fostering the security of supply in Europe by enabling the diversification of supply sources and routes, securing access to global and competitive energy sources, and qualifying as reliable flexibility providers that allow the development of hubs/trading.”

Data indicates that LNG terminals enabled 41% of the European Union’s gas supply in 2023, compared to 17% in 2021, with capacity reserves being essential in reducing gas prices and volatility. Bearing in mind that significant additional capacity for LNG regasification and storage is under construction, the Association of the Gas Infrastructure Operators of Europe is adamant that the LNG industry is “critical to maintaining the security of supply for the next years while preparing to accommodate new gases.”

The EU’s LNG terminals are anticipated to expand capacities to over 4,000 TWh per year or over 400 bcm/year by 2030, propelling the energy transition while supplying the needed flexibility and strengthening the security of supply. This capacity is also expected to be used for renewable and low-carbon molecule imports in the future, as LNG terminals are portrayed as being able to integrate various value chains that will emerge depending on their geographical location, technology, and upstream and downstream developments.

These include BioLNG and synthetic LNG to be handled without any modification; imports of hydrogen carriers through these LNG terminals to complement domestic hydrogen production, with upgraded terminals expected to be able to import different hydrogen carriers, such as ammonia, LOHC, or possibly liquid hydrogen; and syngas from steam methane reforming or pyrolysis.

Luis Ignacio Parada, GLE President, remarked: “LNG terminals provide flexibility to the energy network by allowing for the transport of BioLNG and synthetic LNG without additional investments. At the same time, they could be repurposed to handle hydrogen carriers like ammonia or molecules like CO2. This flexibility also contributes to decarbonisation by integrating renewable gases.

“The LNG terminals enable global and diverse import possibilities, enhancing resilience and reducing dependence on single suppliers. Collaboration with ports is crucial for optimising logistics and lowering emissions. Finally, investing in LNG terminals is a strategic need to diversify supply routes and sources.”

According to Gas Infrastructure Europe (GIE), there are 33 operational large-scale terminals, including onshore and offshore, alongside seven terminals under construction and 16 more planned. The current importing capacity is around 2,500 TWh per year but about 1,100 TWh/year capacity is set to be built by decade-end.

Based on Climate Analytics’ recent analysis ‘Still Adrift Updated assessment of the global energy transition’s impact on the LNG shipbuilding industry,’ commissioned by Solutions for Our Climate (SFOC) nonprofit organization working to speed up global GHG emissions reduction and energy transition, the shipbuilding arena seems to be doubling down on newbuild LNG carriers when the needed and planned shipping capacity for future LNG trade is examined under the International Energy Agency (IEA) scenarios.

This analysis claims the LNG shipbuilding sector is facing oversupply woes as it is not heeding the worldwide shift to a low-carbon economy, with 180 carriers with 32 million cubic meters of shipping capacity in total forecasted for delivery in 2025 and 2026, said to be 28% of the capacity in operation last year with 64 orders for LNG carriers.

In contrast, data covering the period from January to May 2024 indicated that 55 new orders were placed, with another 27 added up to October 2024. According to the analysis, the oversupply of LNG shipping capacity is anticipated to surpass 40% of what is deemed to be required of the industry’s operating capacity, the equivalent of 275 modern LNG vessels.

Wood Mackenzie recently outlined: “The energy transition is at a critical point. Progress is slowing when it should be accelerating. Global emissions must fall immediately to get onto a pathway of 2˚C warming or lower, but instead continue to rise. Our energy transition outlook, now updated for 2024/25, highlights the increasing risk of a potentially catastrophic 3 ˚C pathway, and maps out the course correction now required.”

Another one of SFOC’s reports, ‘Floating Doubts: The Risks of FSRUs in Expanding Methane Gas,’ spotlighted how a global spike in the deployment of floating storage regasification units (FSRUs) was presenting “a significant risk to long-term energy security and climate goals,” giving birth to what has been described by the NGO as “a dangerous expansion of fossil fuel infrastructure that threatens to derail global efforts to combat climate change.”

Rachel Eunbi Shin, Lead of Energy Supply Chain at SFOC, emphasized: “FSRUs are being promoted as a quick fix for energy security. However, they are locking countries into long-term fossil fuel dependence. This approach not only undermines climate targets but also diverts crucial resources and attention from renewable energy development.

“The unchecked growth of the FSRU market poses a significant long-term risk to global climate goals. As nations rush to secure energy supplies, the misleading allure of quick-fix FSRU solutions obscures their long-term environmental and economic drawbacks.”

This report pinpoints Europe, where nine new FSRUs were deployed in two years from 2021, as an example of a region where the situation allegedly is even direr, thanks to a boost of 48.49 mtpa, said to be equivalent to the annual natural gas consumption of a country like Spain.

Thomas Houlie, Climate Analytics’ Energy Analyst and report’s lead author, warned: “No new LNG carriers are needed in any scenario, including both the IEA’s 2023 Net Zero Emissions (NZE) pathway, which aligns with the globally agreed goal of limiting temperature increase to 1.5°C, and the more conservative Stated Policies Scenario (STEPS), that reflects policies already adopted by governments.

“While the International Energy Agency shows no role for fossil gas in the global energy transition, the LNG shipbuilding industry appears to be heading in the opposite direction, which could be to the detriment of everybody involved in the industry.”

Two countries have been identified as the ones responsible for building the lion’s share of LNG carriers: China and South Korea, with the latter described as taking up the vast majority of the industry.

Dongjae Oh, Head of Gas at SFOC, noted: “As the energy transition accelerates at an unprecedented pace, investing in fossil fuel transport capacity represents not just a risky and shortsighted gamble for investors, shipbuilders, and shipowners, but an imminent threat to their financial stability. The LNG shipping industry is approaching a cliff edge of overcapacity, with the widespread looming issue of stranded assets.

“Every new carrier order pushes the industry closer to unsustainable oversupply. Stakeholders must act now to halt new orders or face severe economic consequences as the global shift away from fossil fuels renders these assets obsolete far sooner than anticipated.”

While SFOC sees the construction of fossil-fuel-related vessels as “a recent, and worrying, trend,” in “the declining fossil fuel industry,” Reclaim Finance and Rainforest Action Network (RAN) underline that U.S. banks’ and investors’ “unrestricted” support for LNG is fueling “a future climate bomb” in a report titled ‘Frozen Gas, Boiling Planet,‘ which claims these investments have the potential to unleash over 10 gigatons of GHG emissions.

All analyzed banks are calculated to have poured $213 billion into the global LNG expansion between 2021 and 2023. While the report finds that 85 American banks gave $51.2 billion of the overall financing to the 150 biggest LNG developers between 2021 and 2023, it also underscores that 156 new LNG terminals, 63 of which are export terminal projects mostly along the Gulf Coast, are planned by 2030 by players such as ExxonMobil and TotalEnergies, alongside LNG specialists like Venture Global LNG , NextDecade, and Cheniere Energy.

Among the six banks that have been selected as the ones providing 80% of all U.S. financing to LNG expansion are JPMorganChase with $9.5 billion, Bank of America with $7.1 billion, Citigroup with $7 billion, Goldman Sachs with $6.4 billion, Morgan Stanley with $6.3 billion, and Wells Fargo with $4.6 billion. However, the last one is said to have doubled the financing of LNG expansion in the three-year period.

“The US banks lag behind their European counterparts. Dutch bank ING has committed to end all financing for new LNG export terminals starting in 2026, and Barclays, BNP Paribas, BPCE, Crédit Agricole, HSBC and Société Générale have all introduced some restrictions on financing for LNG export terminals,” said Reclaim Finance and Rainforest Action Network.

Moreover, the research also elaborated that 216 U.S. investors held $179.6 billion in assets of the top LNG developers, with $53.7 billion of these investments attributed to five giant global supporters of LNG expansion: BlackRock, Vanguard, State Street, Fidelity Investments, and Capital Group. These are calculated to account for 21% of global investments in LNG expansion, taking into account figures from May 2024.

Justine Duclos-Gonda, Reclaim Finance’s Oil and Gas Campaigner, stated: “Oil and gas companies are betting their future on LNG projects, but every single one of their planned projects puts the future of the Paris Agreement in danger.

“Banks claim to be supporting oil and gas companies in the transition, but instead they are investing billions of dollars in future climate bombs. LNG is a fossil fuel and new fossil fuel projects have no part to play in a sustainable transition.”