In a global energy market now dominated by the transition to lower-carbon fuels, natural gas is on track to supplant oil as the leading energy source worldwide by the mid-2030s, according to a study released Tuesday by DNV GL at the World Gas Conference (WGC) in Washington, DC.
The "Transition in Motion" report outlines key findings from the Norway-based company's 2018 Oil and Gas Industry Outlook research and 2017 Energy Transition Outlook. It incorporates the view of 813 senior industry professionals surveyed in October and November 2017. The report shows a growing recognition and preparation for the ongoing transition among many major global oil and gas companies.
Two-thirds of the respondents (64%) indicated that their organizations are increasing or sustaining investment in gas projects this year, while 86% believe gas will "become an increasingly important component of the global energy mix over the next 10 years," compared with 77% last year. Another 44% indicated their organizations are preparing for the gas transition and a less carbon-intensive energy mix.
DNV GL said confidence in the case for gas is growing. Survey results also indicated a primary driver for investment in liquefied natural gas (LNG) and other gas projects is the global energy transition.
Findings from the energy outlook survey show that nearly a quarter of respondents believe onshore pipeline projects are adaptable enough to cope with potential long-term changes in the gas mix. A clear majority (72%) believe that transitional coal-fired generation will become obsolete over the next few decades, while the attractiveness of gas will "improve significantly." Year/year, 55% of respondents think gas prices will decouple from oil, compared to 45% of respondents who felt that way last year.
"The stage is set for gas to become the largest single source of energy," DNV GL said. "Demand for gas will peak in the mid-2030s, well after the use of each of the other fossil fuels has gone into long-term decline," according to the DNV GL's 2017 Energy Transition Outlook.
"Society's transition to a less carbon-intensive energy mix is already a reality, and oil and gas will continue to be crucial," said Liv Hovem, CEO at DNV GL Oil and Gas. "Our research affirms that the industry is already taking positive steps to secure the important role we forecast gas to play in helping to meet future, lower-carbon energy requirements."
The 2017 transition outlook forecast of global energy to 2050 by DNV GL predicts global oil demand will plateau during the next 15 years, peaking in the early 2020s, while gas demand will keep growing for another two decades, peaking in the mid-2030s. "By then, gas demand will be around 15% greater than it was in 2017 and gas will have overtaken oil to become the world's largest energy source," according to the report.
From this point, the energy transition enters the final phase-out of fossil fuels as primary components of global energy supply, the report says. "This is the most likely scenario, considering the known variables, and it highlights the crucial importance of gas in the near- and medium-term."
DNV GL's report cautioned that the landscape could shift. "There are uncertainties that could change the trajectory of the energy transition and impact the prospects for gas. The ultimate scale, mix and location of gas transport projects, and regulatory and geopolitical reforms, all could alter future supply/demand equations.
But the report points out that companies who had the foresight to anticipate and act on the current demand for LNG are outcompeting their rivals in the world's fastest growing energy segment. "If we hadn't taken a long-term view, we would have never gotten into the LNG business," said Mark Gainsborough, executive vice president of Royal Dutch Shell plc’s New Energies business.
The report came the same day that the International Energy Agency (IEA) said worldwide gas demand will grow at an average rate of 1.6% annually. IEA said rising supplies from the United States, demand growth in China and more industrial demand will transform global natural gas markets over the next five years.
Demand should reach just above 4,100 bcm in 2023, up from 3,740 bcm in 2017, according to IEA.