(Montel) EU will need gas without speedier green transition – experts

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Europe will need to rely on natural gas for at least another decade or more without a speedier transition to low-carbon energy technologies, experts told Montel.

The question remains how long companies will continue their upstream investments to extract the gas as Europe strives to reach net-zero emissions by 2050.

In its medium-term outlook, the International Energy Agency (IEA) said that upstream oil and gas investments were set to hit their highest level since 2015 at USD 528bn this year, up about 11% from 2022, and called in June on sector players to keep investing.

However, the independent intergovernmental agency told Montel that the drop in fossil fuel demand was “sufficiently steep” that no investments in new oil and gas fields will be required. 

“Upstream investment in new fields is only needed if the world fails to mobilise investment in clean energy,” said Lisa Fischer, programme lead at climate change think-tank E3G.

“Demand-side risk”

“This is all about how to deal with the demand-side risk,” she added, pointing out that the IEA anticipates gas demand to peak at the end of this decade.

“Opening new supply now may alleviate short-term energy security concerns where this can be developed fast and pays back quickly,” Fischer noted, but flagged Europe’s binding climate targets to slash emissions.

Asked whether Europe could meet its carbon neutrality goal while still relying on gas, Fischer said gas already emits more emissions than coal in the EU, which means that adding new gas consumption “can hardly be seen as transition fuel”.

“In fact, for most applications, non-gas solutions are available, so the gas transition bridge has almost entirely lost its grounding.”

Russia’s war on Ukraine has prompted Europe to find alternatives to Russian gas such as importing more LNG and building infrastructure to store and ship the chilled fuel within the region. 

The 27-nation bloc also saw gas demand drop last year when gas prices spiked to record highs, and some analysts expect this demand destruction to be lasting – perhaps not as severe as last year.

Unused LNG infrastructure?

The Institute for Energy Economics and Financial Analysis (IEEFA) expects the decline in demand to leave more than half of Europe’s LNG infrastructure assets unused by 2030.

Equity research analyst at JP Morgan Vincent Ayral confirmed the need to soon replace LNG with greener fuels, but believes that gas will likely remain “the first leg of the transition” until either large-scale economical storage solutions or carbon-free alternatives are found.

Henry Edwardes-Evans, EMEA gas and power specialist for S&P Global Commodity Insights, said that gas turbines would be needed to balance energy systems for the decades to come. 

“A slow transition to alternative fuels means that these turbines can be an enduring solution, not just a bridge.”