Carbon Tracker Sees $283 Billion of LNG Projects as Uneconomic

About $283 billion of liquefied natural gas projects may be surplus to requirements if the world is to keep carbon emissions below levels aimed at holding global warming to less than 2 degrees Celsius, the Carbon Tracker Initiative said.

In the next decade, 16 of the 20 biggest LNG companies are studying major projects that probably won’t be needed, according to a report by the group, which argues a large share of fossil-fuel reserves must stay in the ground to stem climate change.

The 2-degree limit is the level that scientists have advised is needed to avoid the worst effects of climate change.

About $71 billion of potential LNG capital spending will be unnecessary in the U.S. over the decade, along with $82 billion in Canada and $68 billion in Australia, based on the study’s lower-demand scenario, the London-based group said in a statement on Tuesday.

While the move to a low-carbon economy shows some room for gas-demand growth to 2040, energy companies will need to choose which projects to develop, Carbon Tracker said. As the cost of renewable energy falls, some regions will probably leapfrog over using gas, curbing demand for LNG, which is already in a glut.

“The current oversupply of LNG means there is already a pipeline of projects to come on stream,” said James Leaton, Carbon Tracker’s head of research. “It is not clear whether these will be needed and generate value for shareholders.”

New projects that rely on an LNG price of more than $10 per million British thermal units may not be needed, the group said.

More than half the unnecessary LNG capital spending relates to unconventional gas projects such as shale, tight gas and coal bed methane, it said. At the same time, only about 17 percent of LNG fed by North American shale gas or Australian coal bed methane is needed in a low-demand scenario, the group added.

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