The large range of differences in assumptions about future natural gas demand (especially in the medium to long term), coupled with a high level of misalignment between near-term supply needs with policy and financial developments, creates a high level of risk of future supply imbalances.
This is according to the findings in the Global Gas Report 2023 Edition by the International Gas Union (IGU), which Nigeria through the Nigerian Gas Association is a member of.
Despite recent optimism around certain Liquefied Natural Gas (LNG) investments, investment growth is occurring on the back of a prolonged period with low investments, and the total level and off-take agreements are still short of what is needed to produce sufficient supply to rebalance and ensure security in the global energy markets.
This risk means that the current energy environment may experience future crises as seen in 2021 and 2022, with more severe and frequent price and demand shocks. This would in turn cause disruptions in economic development and environmental consequences – especially in the developing world, where demand for natural gas could fail to be met, and greater use of coal, oil, and biomass use may occur.
Gas is projected to remain a key component in the energy policies of major global consumers at least until 2050, however, there are challenges and significant uncertainty on how future gas projects will be developed and maintained. These uncertainties encompass financing challenges, carbon pricing, and public sentiment.
Considering the Russia – Ukraine conflict, the Biden Administration announced an agreement committing the US LNG industry to supply at least 50 billion cubic meters (1.77 trillion cubic feet) of additional US LNG until at least 2030, equating to around one-third of the EU’s gas imports from Russia in 2021. This is widely regarded as a window of opportunity for US LNG project developers which will require an increase in export capacity.
However, on top of the struggle to secure long-term off-takers to underwrite financing, financing conditions have become considerably more difficult, with higher interest rates underpinning uncompetitive project economics.
Though this is largely to penalise the financing of highly polluting sectors such as coal, the gas industry has also been affected. Leading financial institutions have taken a definite stance, vowing to cease new project funding for future oil and gas projects, especially on the production side. For example, large banks such as ING, BNP Paribas, and HSBC have committed to seizing funding for new oil and gas projects.
This shift is driven by a substantial transformation in the policies of lenders, and other financial enablers, aligning with both their net-zero scenario assumptions and targets set by their respective home countries.
Additionally, debt issued for fossil fuel projects has declined and was surpassed by green projects in 2022. The inability to secure financing will result in delays in project Final Investment Decisions (FIDs), placing more stress on an already tight global gas market.
For example, the FID of NextDecade’s Rio Grande LNG project has been repeatedly delayed due to rising borrowing and labour costs, and French bank Societe Generale SA withdrew as the lead bank of the project in 2022.
As such, for the needed gas projects to proceed, policymakers should work closely with financiers to create a more favourable financing environment for project developers. This collaboration can help mitigate the potential impact of transition risks like stranded assets, facilitating the development of necessary assets and infrastructure, while providing a more effective lever to enforce environmental performance.
As of August 2023, according to the World Bank carbon pricing dashboard, only 23 percent of global greenhouse gas emissions are covered by existing carbon taxes or emissions trading schemes, amounting to 11.7 giga-tonnes of CO2 equivalent out of the total 50.7 giga-tonnes emitted in 2023.
More is needed to incentivise large-scale switching towards cleaner alternative energy sources, including gas and renewables.
Carbon pricing is a key enabler for coal-to-gas switching, increasing the attractiveness of gas as a cleaner fuel, and renewables as an emission-free energy source.
For the world to accelerate fuel switching away from emission-intensive sources such as coal and fuel oil, carbon pricing needs to be widely adopted. And the price needs to be commensurate to the real cost of emissions to disincentivise the use of emission-intensive sources.
In Japan for example, the Ministry of Economy, Trade, and Industry have committed to reducing coal in the energy mix from 32 percent in 2019 to 19 percent by 2030, while scaling renewables to almost 40 percent by 2030, from 18 percent in 2019.
However, its current carbon tax stands at $3 per tonne of CO2, while the International Energy Agency estimates a carbon price of at least $130 per tonne of CO2 is required for developed countries, for transition to take place effectively. Meanwhile, carbon pricing levels are globally far below this threshold.
The EU Carbon Border Adjustment Mechanism (CBAM) aims to address unequal carbon taxation levels by taxing the “untaxed” carbon emissions for imports into the EU. As part of the EU Green Deal, the CBAM will apply a carbon tariff on carbon-intensive imported products.
EU importers will buy carbon certificates corresponding to the carbon price that would have been paid had the goods been produced under the EU’s carbon pricing rules.
The measure is designed to reduce carbon leakage and ensure a level playing field for importers and domestic producers. As such, EU importers will be more cautious in purchasing decisions, potentially favouring suppliers with a lower carbon footprint.
In conclusion, there is a growing gap between the trajectory of supply development and plausible demand for natural gas that could be risky for economic and decarbonisation developments.
There is a higher possibility of heightened demand and price shocks in the coming decades – like the ones seen in 2021 and 2022 – likely to be driven by muted supply outlooks and challenging financial conditions in a gas market that seems to be highly fragile and thinly balanced.
Thus, governments, financial institutions, and energy companies must align efforts and incentives to ensure reliable, sustainable, and affordable future energy markets.
Global wind industry needs 600,000 technicians by 2027
New figures have clarified the workforce challenges facing the global wind industry with nearly 600,000 technicians needed over the next five years, with more than 240,000 of these roles new recruits to the industry.
The Global Wind Organisation (GWO) and Global Wind Energy Council (GWEC) have published their latest joint report forecasting the numbers of wind technicians required to construct, install, operate, and maintain (C&I and O&M) the anticipated global wind fleet up to 2027.
The Global Wind Workforce Outlook 2023-2027 sets out that over 574,000 technicians will be required for C&I and O&M by 2027, but to keep pace with this growth, almost 43 percent of them will be new to the industry, joining from an education and recruitment pipeline or transferring from other sectors, such as offshore oil and gas.
Jakob Lau Holst, CEO of GWO, said workforce development is top of mind for policymakers, industry associations and employers.
“The Outlook demonstrates not just how many people will be needed for the forecast installation and maintenance of the world’s wind fleet but emphasises how many of these will be new arrivals to the sector.
“This underlines the need for a renewed focus on entry-level skills that match the needs of employers and complements the existing capabilities people bring from other sectors and education systems.”
Annual wind energy installations are expected to double from 78 gigawatts (GW) in 2022 to 155 GW in 2027, bringing the total wind capacity worldwide to more than 1,500 GW in just five years. Driven by technology innovation and the fast-growing offshore wind market, the outlook predicts a 17 percent rise in the number of wind technicians required for C&I and O&M over the five-year forecast period.
That growth would require an extra 84,600 technicians to support the expansion of wind power. However, with a typical 6 percent attrition rate the wind industry would also need to recruit an additional 159,200 people to replace the technicians expected to naturally exit the wind industry between 2023 to 2027.
The need to recruit the extra 243,800 new technicians over the next five years suggests a raft of opportunities for new talent to enter from full-time education and transition from other sectors, including from the conventional sector.
This in turn highlights the wind sector’s role in supporting a just and equitable energy transition away from fossil fuels. As a result, the Global Wind Workforce Outlook 2023-2027 highlights an urgent need for faster growth in safety and technical training capacity to meet the anticipated supply chain gaps.
“A strong workforce and healthy supply chain will be crucial to the colossal growth of wind capacity in this decade. It is vital that the growing workforce is provided with the tools to train properly, with an approach that puts health and safety at the heart of industry growth,” Ben Backwell, CEO of GWEC added.