G7 Leaders Leave Door Open to New Natural Gas Investments

SEATTLE (Oil Monster): Energy and environment ministers from the Group of Seven (G7) economically advanced nations, including the United States, agreed to ramp up electricity generated by renewable energy sources to accelerate the transition away from fossil fuels.

Yet the ministers, recognizing global demand shifts amid Russia’s war in Ukraine and the particular energy needs of meeting host country Japan, paved a path for continued investment in natural gas during a transition projected to reach a pinnacle in 2050.

The countries have committed to reaching net-zero emissions by mid-century, in large measure by phasing out fossil fuels. But G7 leaders noted that, since the onset of Russia’s invasion in February 2022, the Kremlin has cut off the bulk of gas delivered to Europe via pipeline. This dramatically bolstered European calls for U.S. exports of LNG. By extension, the shift set the stage for increased global competition for liquefied natural gas, given Asia’s increasing use of the super-chilled fuel to displace coal. Japan lobbied for long-term access to LNG.

“We recognize that Russia’s war of aggression against Ukraine impacts energy markets and supply security globally,” and this “has intensified competition in securing resources,” the G7 ministers said in a statement at the culmination of their meeting Sunday in Sapporo, Japan.  

“In this particular context,” the ministers added, “investment in the gas sector can be appropriate to help address potential market shortfalls provoked by the crisis, subject to clearly defined national circumstances, and if implemented in a manner consistent with our climate objectives.” This could be accomplished, for example, “by ensuring that projects are integrated into national strategies for the development of low-carbon and renewable hydrogen.”

The ministers reaffirmed the G7’s “commitment to achieve net-zero emissions throughout the entire fossil fuel extraction and production chain by 2050.” Yet, they added, “we recognize the need to coordinate plans to mitigate the risks associated with the unpredictability of Russia’s exports of gas. We note the importance of continuing to monitor the situation.”

U.S. natural gas producers are holding their output near record levels of 102 Bcf/d to help meet the global demand.

U.S. dry natural gas production averaged 101.6 Bcf/d during the first quarter of 2023, a 1.4% increase over the comparable period of 2022, according to the Energy Information Administration (EIA). Producers remain active in part to stay ahead of an expected surge in LNG demand next year when new U.S. liquefied natural gas export facilities are slated to open, the agency said in a report this month.

Overall, EIA said output would continue to grow through mid-century. It estimated total domestic gas production would increase from 7.2 Tcf in 2025 to 8.8 Tcf by 2050.

In addition to the United States and Japan, G7 countries include Germany, France, Canada, Italy and the UK. The G7 nations said they account for an estimated 40% of global economic activity and a fourth of the world’s carbon emissions.  

Collectively, the advanced countries vowed to increase offshore wind capacity by 150 gigawatts by 2030 and solar capacity to more than 1 terawatt.

“We will accelerate the deployment of renewable energies such as solar, onshore/offshore wind, hydropower, geothermal, sustainable biomass, biomethane, tidal using modern technologies, as well as investing in the development and deployment of next-generation technologies and developing secure, sustainable and resilient supply chains,” the ministers said, emphasizing a pressing need to phase out coal.

Still, the G7 members stopped short of setting a hard deadline to end use of coal-fired power plants, largely because of Japan’s opposition. The island country has argued that, for the foreseeable future, it needs natural gas and coal to meet its power needs. It has noted the loss of a major power supply after the Fukushima Daiichi nuclear plant was disabled by an earthquake in 2011.

Japan estimated it still relies on coal for nearly one-third of its power generation. Its G7 minister said Japan is shifting to so-called clean coal, using technology to capture carbon emissions.

“I believe that we were able to demonstrate to the international community that our commitment to climate change and environmental issues is unwavering,” said Akihiro Nishimura, Japan’s environment minister, according to the Associated Press.

Courtesy: www.naturalgasintel.com