Demand for liquefied natural gas (LNG) is defying earlier predictions that the global energy transition would diminish reliance on fossil fuels. Despite the expansion of renewable energy sources like wind and solar, significant growth in LNG consumption continues, prompting major oil companies to double down on their investments in this sector.
In recent quarterly reports, major oil firms highlighted the importance of their LNG operations. Shell announced plans to increase its LNG capacity by 12 million tons by 2030. TotalEnergies is also pursuing growth, aiming to enhance its LNG volumes under management by 50% in the same time frame. BP has initiated a new LNG project off the coasts of Senegal and Mauritania, positioning the two nations as a future LNG hub. Similarly, ExxonMobil and Chevron have ambitious plans, with Exxon targeting a 50% increase in its LNG assets by 2030.
According to CNBC’s Sam Meredith, this strategic shift may seem risky given forecasts suggesting that natural gas demand could peak before 2030. Many of these forecasts come from organizations that advocate for the energy transition, including the International Energy Agency (IEA) and various climate-focused think tanks. Nevertheless, the IEA recently projected that global demand for natural gas, particularly LNG, is set to grow.
The agency reported, “Global demand growth is expected to pick up again in 2026, accelerating to around 2% as a considerable increase in LNG supply eases market fundamentals and fosters stronger demand growth in Asia.” The IEA anticipates a significant 7% increase in LNG supply, or approximately 40 billion cubic meters (bcm), driven by new projects in the United States, Canada, and Qatar.
Despite the expansion of renewable energy in Europe, which has seen record additions of wind and solar capacity, the expected reduction in fossil fuel use has not materialized. In the first quarter of 2023, carbon dioxide emissions in the European Union increased by 3.4% year-on-year, coinciding with a 1.2% growth in the economy. This uptick can be attributed to higher electricity generation from coal and natural gas, as renewable sources fell short of expectations.
The ongoing demand for natural gas is further underscored by the shift in electricity consumption patterns. As noted by the International Monetary Fund, electricity usage by data centers is already comparable to that of Germany or France and could match India’s consumption by 2030. This surge in electricity demand will likely necessitate an increase in reliable energy sources, which natural gas can provide, given its ability to generate dispatchable electricity.
Critics argue that the continued growth in LNG demand could undermine the goals of the energy transition. The data from the EU indicates that real-world energy consumption is consistently at odds with transition targets. As energy needs evolve, it may be necessary to reassess and adjust these goals to better align with observable trends in energy demand and supply.
The focus on LNG by major oil companies reflects a broader acknowledgment of the complexities involved in transitioning to a sustainable energy future. As LNG continues to play a crucial role in meeting energy demands, the landscape of global energy supply is likely to remain heavily influenced by these developments in the coming years.