September 21, 2018 Read More →

Gas industry may be next target for renewables, analysts say


The global gas industry, boosted by a host of new projects to feed booming demand, is in better shape than at any point in the last five years but analysts warn it is getting ahead of itself, pointing to the rise of renewable energy as a threat.

Commodity merchant Vitol expects trade in liquefied natural gas (LNG) to double to 600 million tonnes annually (mtpa) in the coming years, reflecting forecasts by Russian LNG producer Novatek which sees 700 mtpa by 2030. To meet that demand, companies are working on final investment decisions for a new wave of mega projects.

“The industry is confident,” said Christian Brown, president for the oil and gas sector at Canadian-listed SNC Lavalin, an industrial project management company. Brown said the industry was in its best shape since 2014, when a slump in oil and gas prices led to aggressive cost cutting and scrapping of projects. He said most growth was coming from U.S. unconventional oil and gas.

Still, not everybody is buying into the industry’s confidence, warning the fast rise of cheap renewable power generation, backed up by improving battery technology, would increasingly take market share away from the gas industry.

“The oil and gas industry are undergoing major disruption from electrification and renewables,” said Bernadette Cullinane, of Deloitte Consulting. “LNG producers must lower costs to compete with solar plus storage,” she said, warning that projects vying for investment, but unable to reduce costs enough to compete with renewables, were likely fail.

Following a sharp price falls in panel costs and improvement in efficiency, global solar power capacity has soared from just 15 gigawatt (GW) a decade ago to around 400 GW now, data from the International Renewable Energy Agency (Irena) showed. Most forecasts expect capacity to double again by the mid-2020s.

“Given how fast this disruption is occurring, we believe the oil and gas industry must act now,” Deloitte’s Cullinane said.

More: Buoyant gas industry may be blindsided by renewables

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