US – natural gas love affair: Policymakers urged to acknowledge LNG’s ‘vital’ role in clinching global energy security and decarbonization

The lion’s share of today’s global energy comes from fossil fuels, but climate change has pushed policymakers to put more effort into replacing coal, oil, and natural gas with renewables. While some are fighting tooth and nail to usher in a green energy future, others are pointing out the risks and pitfalls of a headlong rush into emerging clean energy sources of supply while holding on to traditional fuels with a tight grip. The American Petroleum Institute (API) is adamant that oil and gas will continue to be at the heart of energy security with liquefied natural gas (LNG) further entrenching its role as the top transition fuel.

COP28 showcased the winds of change sweeping across the energy landscape. No one can dispute the fact that this is the first-ever COP to mention transitioning away from all fossil fuels. Aside from tripling renewable energy capacity and doubling the rate of energy efficiency improvements by 2030, the final text of this climate conference brings into play the importance of tackling methane emissions and other non-CO2 emissions in this decade along with the need to do much more to meet the goals of the Paris Agreement.

Based on what’s contained within the final text and the reactions so far, the outcome of COP28 can be described as a mixed bag of actions and steps that will enable all participants to celebrate certain wins while frowning upon and resigning themselves to the losses concerning concessions that were needed to secure those wins in the first place.

In response to the COP28 final agreement, Dustin Meyer, API’s  Senior Vice President of Policy, Economics and Regulatory Affairs, commented: “Demand for affordable, reliable energy will continue to rise as global population increases, and the world will need more sources of energy, not fewer.

“The U.S. has led the world in both production gains and emissions reductions, and our industry is focused on building on this progress by accelerating innovation, advancing smart policies and investing in low-carbon technologies. We’re committed to working with policymakers on solutions that keep all options on the table – from renewables to oil and natural gas – and advance our shared goal for a cleaner, more secure energy future.” 

The COP28 outcome comes against the backdrop of rising geopolitical challenges, global inflation, and energy security woes. Closer scrutiny of the outcome has sparked concerns that the text keeps the doors wide open for more natural gas and LNG. Will the fossil fuel industry take full advantage of this opportunity? The LNG boom has been on the horizon before COP28 but will the stronger green agenda result in even more litigation against such projects in the future? Time will tell, but it does seem likely.

The energy industry’s enthusiasts and critics are familiar with how swiftly the United States rose through the ranks to become the world’s largest exporter of LNG. API, as the U.S. trade association representing the oil and gas industry, highlights that LNG helped establish America as “a cornerstone of global energy security and driving local economic development” in less than a decade.

With the threats to further LNG boom at the forefront, the American Petroleum Institute and International Association of Oil and Gas Producers (IOGP) recently released new analysis from Rystad Energy, showing that despite recent progress in fortifying energy security following the Ukraine crisis, Europe could still face “a looming natural gas supply gap” in the coming decades.

Rob Jennings, API Vice President of Natural Gas Markets, remarked: “While U.S. LNG helped mitigate a potentially disastrous situation in 2022, there’s more work to be done to help ensure Europe and the global energy market are well-supplied in the long-term.

“Instead of restrictive policies that ignore the reality that global energy demand is rising, we need policymaking that recognizes the vital role U.S. LNG can play in meeting that demand while advancing global climate goals and promoting America’s national security interests.” 

API claims that U.S. LNG remains “the most feasible, reliable and competitive option” to meet Europe’s natural gas demand, as the region continues to make strides in curbing its reliance on Russian natural gas. The U.S. sent more than 800 LNG cargoes to Europe in 2022, representing roughly two-thirds of its total LNG cargoes, and a 141% increase over the prior year.

The findings from the new study underscore that Europe will need 600 billion cubic meters (bcm), or the equivalent of roughly 12 billion cubic feet per day (BCFD), of natural gas supplies between 2023 and 2027 to meet its commitment to halt all Russian pipeline gas imports by 2027. While this is “a significant supply gap,” API is sure that American LNG can help fill it.

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The U.S. trade association warns that Europe’s supply gap could be even larger in the longer term, adding that Europe needs nearly 2,500 bcm between 2028 and 2040, or an average of 18 bcfd, of new natural gas supplies. The current data indicates that Europe has only contracted 32% of the LNG it could need over the 2028-2040 period and inked less than half the number of long-term contracts that buyers in the Asia Pacific region have signed.

As a result, the American Petroleum Institute believes that long-term contracts for LNG are “crucial” to ensuring a stable supply of energy and minimizing the risks of demand uncertainty. API further notes that American producers will have a “critical” role in supplying growing energy demand. 

The U.S. trade association underlined: “Pragmatic policies can help cement America’s status as a global energy leader. Timeliness and transparency across the permitting and approval process for the full LNG value chain is critical to ensuring the United States can deliver affordable energy and strengthen global energy security. Meeting growing demand while achieving an affordable, reliable and sustainable energy future will require all forms of energy.

“Natural gas has enabled the U.S. to lead the world in emissions reductions and contributed to CO2 emissions falling near generational lows thanks to coal-to-natural-gas fuel switching in the power sector. As countries dependent on coal look to natural gas to help lower their emissions, abundant and reliable U.S. LNG is key to advancing climate solutions while promoting global energy security.”

Climate campaigners and environmental activists are leaving no stone unturned in their quest to halt the further build-out of fossil fuel infrastructure, including LNG projects. One of the giant projects Earthjustice is burning the midnight oil to stop from being built on the Gulf Coast of Louisiana is Venture Global LNG’s Calcasieu Pass 2 (CP2) LNG terminal, which will be located on an approximately 546-acre site in Cameron Parish, Louisiana.  

Earthjustice claims that this project could pollute up to 20 times the annual carbon emissions of the Willow drilling project in Alaska, equivalent to emissions from more than 42 million gas-powered cars or more than 50 coal-fired power plants. This is the reason why the nonprofit public interest environmental law organization is putting pressure on the federal government to reject the CP2 project, emphasizing that LNG is “one of the dirtiest fuels on the planet.”

These views on LNG are very different from the belief that this is the perfect candidate to fuel the transition, however, the CP2 project is just one chapter in a weighty tome about the LNG build-out. The law organization is fighting to put an end to the stamps of approval for fossil fuel industry expansion and put the communities and renewable energy at the top of the government’s agenda.

Earthjustice elaborated: “U.S. gas exports have skyrocketed in recent years, as the fossil fuel industry pushes a build-out of LNG export facilities to sell gas overseas at record profits. Despite the threats to public health, the climate, and higher energy costs for consumers, the government is continuing to approve new projects that are not in the public interest. CP2’s pollution, traffic, sprawl, and visual impact would affect nine local communities along the Gulf Coast.

“This project would be located next to an existing export facility, Calcasieu Pass LNG, which has repeatedly violated its permits, and potentially another LNG export terminal. These communities already bear the burden of heavy industry and are on the frontlines of the bigger hurricanes and storms fueled by climate change.”

During a recent inaugural ‘Resilience and Equity in the Clean Energy Sector Summit (RECESS23)’ in Detroit, Michigan, Michael Nutter, Former Philadelphia Mayor and member of the Natural Allies for a Clean Energy Future Leadership Council, participated in a panel conversation entitled, ‘Driving Equity while Decarbonizing Cities’ where he spoke about the challenge of balancing the triple whammy of energy access, affordability, and sustainability.

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“This is a historic moment for our leaders to be part of the national conversation around climate change and America’s energy agenda. We must adopt a pragmatic approach to reach our collective climate goals, recognizing that climate, reliability and affordability are all connected. But in doing so, we have an obligation to ensure that no communities are being marginalized as we build the cleaner energy economy of tomorrow,” outlined Nutter.

While natural gas may not be the most popular solution among all the audience members at RECESS23, the former Philadelphia Mayor underlines that this fuel is “a critical resource” along with renewable energy, in ensuring reliability and affordability for all communities. Natural Allies for a Clean Energy Future is among the voices advocating for equity in the pursuit of climate goals.

“For far too long communities of color have been ignored and largely underrepresented when it comes to the issue of energy. We must center Black and Brown voices to drive meaningful, long-lasting change. We need to be serious in this conversation and understand that natural gas, in partnership with renewables, is part of our transition to reach our climate goals more quickly,” concluded Nutter.

Meanwhile, the Energy Industries Council (EIC), an energy trade association, has published its latest country report focused on the United States, which provides a deep exploration of America’s dynamic energy sector and explores the impact of the Inflation Reduction Act (IRA). The 55-page report examines various facets of the U.S. energy landscape, shedding light on crucial aspects of oil and gas production, downstream activities, electricity generation, renewable energy trends, and the evolving scope of clean energy initiatives.

The EIC’s report points out that the United States maintains its position as the leading oil-producing country and sees 85% of production stemming from onshore activities, but also highlights notable developments in the Gulf of Mexico (GOM), with projects such as the Vito oil field and King’s Quay floating production system (FPU).

Moreover, the report sheds light on the rising prominence of renewables, including solar and wind, explaining that solar power, buoyed by tax credits and the Infrastructure Bill, is anticipated to contribute over 40% of U.S. electricity by 2035. The U.S. is actively pursuing cost reduction in hydrogen production through initiatives like the National Clean Hydrogen Strategy and the Hydrogen Hubs Program, backed by the Bipartisan Infrastructure Law.

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Firdaus Azman, the author of the report, noted: “While the IRA champions renewables and clean tech, it still has lingering attachments to the oil and gas sector. We should beware of mixed messages – America’s energy policy is still a work in progress.”

Even though challenges persist for solar and wind industries, including supply chain issues and policy changes, the report showcases their pivotal role in achieving the U.S.’s net-zero emissions target by 2050, with offshore wind projects, particularly in the Gulf of Mexico and the Northeast region, showing promise.

“The U.S. energy market is not for the faint-hearted, but for those willing to embrace the challenges and leverage the opportunities, it can be a rewarding journey,” Azman said.

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