- Shell, BP, TotalEnergies, Exxon, and Chevron are rapidly expanding liquefied natural gas capacity, betting on long-term demand.
- Even with record wind and solar growth, Europes emissions rose as coal and gas filled supply gaps.
- Critics warn rising LNG use undermines climate targets, but industry momentum suggests energy transition objectives may need revisiting in light of real-world demand trends.
The energy transition was supposed to kill demand for oil, natural gas, and coal. The more wind and solar capacity that was built, the less hydrocarbons were supposed to be in demand. Instead, demand for all three continues to growespecially natural gas. So Big Oil is doubling down on this core business, much to the chagrin of transition advocates.
CNBCs Sam Meredith noted in an article this week the latest quarterly reports of several Big Oil majors, all of which had emphasized the importance of their LNG business. Indeed, LNG has become a focus of attention for the supermajors in the age of artificial intelligence that, according to analysts, is going to drive global electricity demand sky-highand wind and solar will not be able to cover that demand.
Shell said two months ago it was going to add LNG capacity of 12 million tons by 2030. TotalEnergies is pursuing both its own LNG projects and LNG trading with other producers, with plans to boost its LNG volumes under management by 50% by 2030. BP started a new LNG project earlier this year offshore Senegal and Mauritania, and plans to turn the two countries into a major LNG hub. Exxon and Chevron are no less ambitious in the segment, with Exxon eyeing a 50% increase in its LNG assets by 2030, and Chevron is planning a further global expansion in its LNG operations as well.
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According to CNBCs Meredith, this may be a risky bet in the context of forecasts saying that demand for natural gas would peak before 2030. The sources of those forecasts, besides the International Energy Agency (a vocal advocate for the energy transition) are other outlets that are vocal advocates for the energy transition, including climate change-focused think tanks and wind and solar power industry associations.
Yet it was the International Energy Agency that said in a recent report it expected demand for natural gas to continue growingand specifically demand for liquefied natural gas. The report sees global demand growth picking up again in 2026 and accelerating to around 2% as a considerable increase in LNG supply eases market fundamentals and fosters stronger demand growth in Asia, the IEA reported. ?In 2026, LNG supply is set to rise by 7%, or 40 bcm its largest increase since 2019 as new projects come online in the United States, Canada and Qatar.
That could perhaps be dismissed as the last twitches of a dying industry before death proper occurs, but this is clearly not the case, based on the latest evidence of hydrocarbon use in Europe, which has been adding record amounts of wind and solar capacity for a decade, with the rate of additions continually accelerating. Yet the massive growth in wind and solar capacity has not translated into much lower demand for natural gas.
Based on data for the first quarter of the year, the European Unions carbon dioxide emissions increased by 3.4% on the year, as the blocs economy grew by 1.2%. The increase in emissionsand arguably the GDP growthwere the result of higher electricity generation from coal and gas power plants as wind and solar consistently under-delivered in the first three months of the year.
That should be enough to cement Big Oils decision to focus on LNG as a source of long-term profit growth, and it probably is, especially combined with the outlook for artificial intelligence growth and its effect on electricity demand.
The electricity used by data centers alone, already as much as that of Germany or France, would by 2030 be comparable to that of India, the world's third-largest electricity user, the International Monetary Fund said earlier this year. This would also leapfrog over the projected consumption by electric vehicles, using 1.5 times as much power than EVs by the decades end. To avoid tightness on the electricity market, leading to higher prices, supply had to increase.
This is not going to be a wind and solar supply because wind and solar may be good for reputational purposes, but they do not generate dispatchable electricity. The kind of electricity that data centers need is dispatchable, meaning available on demand, round the clock. That is the kind of electricity that gas-powered stations generate. It is also the kind that coal power plants and nuclear reactors generatewhich is why Big Tech is on a contract spree for all three.
According to critics, the growth in demand for natural gas will compromise the goals of the energy transition. This is quite true, but the fact, as evidenced by the EUs emissions data for the first quarter, real life itself is constantly compromising the targets of the energy transition. Perhaps the time has come to review those goals and possibly revise them to better align them with actual events and developments in the demand and supply of energy in the real world.
By Irina Slav for Oilprice.com
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