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Industry investment gears to gas

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Hans Kristian Danielsen Hans Kristian Danielsen
Global Head of Marketing and Sales - Oil & Gas
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  • Nearly half of senior oil and gas professionals are actively preparing for the transition to a lower-carbon energy mix

  • The clear majority agree that gas will play an increasingly important role over the next decade; the stage is set for it to become the world’s largest energy source in the mid-2030s

  • The energy transition is the primary driver for investment in natural gas and liquefied natural gas (LNG) projects in 2018

As the oil and gas sector prepares for gas to overtake oil as the world’s primary energy source in the mid-2030s, nearly two-thirds (64%) of the industry’s senior professionals expect to increase or sustain spending on gas projects in 2018, according to research by DNV GL.

Industry leaders are increasingly convinced by the case for gas in the unfolding energy transition. A clear majority (86%) of global sector leaders surveyed agree that gas, the least carbon-intensive fossil fuel, will play an increasingly important role in the global energy mix over the next decade, up from 77% last year.

Nearly three-quarters (72%) believe that, as traditional coal energy generation is significantly reduced over the coming decades, the long-term attractiveness of gas will flourish (Figure 1). 

The findings appear in Transition in Motion, a special report from DNV GL’s research on the outlook for the oil and gas industry in 2018. It reveals the primary driver for investment in natural gas and LNG projects this year to be the global energy transition (Figure 2).  

“Our research affirms that the industry is already taking positive steps to secure the important role we forecast gas will play in helping to meet future, lower-carbon energy requirements,” said Liv Hovem, CEO, DNV GL - Oil & Gas. 

The industry’s growing confidence in the case for gas reaffirms expectations for it to remain a crucial component of the global energy mix over the coming decades. 

DNV GL’s 2017 Energy Transition Outlook (ETO), an independent forecast of the global energy mix in the lead-up to 2050, predicts that global oil demand will plateau over the coming 15 years, peaking in the early 2020s.1 Meanwhile, global gas demand will grow for another two decades, peaking only in the mid-2030s. By then, gas demand will be around 15% greater than in 2017, and gas will have overtaken oil to become the world’s largest energy source. 

Of the 813 senior industry professionals surveyed for our 2018 Oil and Gas Industry Outlook, nearly half (44%) report that their organization is actively preparing for a shift to a lower-carbon energy mix this year.2  

However, the pace of the industry’s conversion to the energy transition differs regionally. More than half (51%) of respondents in Middle East and North Africa say that their company is actively preparing this year for the shift, compared with only a third in North America (33%).

DNV GL’s ETO forecasts that North East Eurasia, and Middle East and North Africa, will increase gas output towards at least 2040. In doing so, they will overtake North America as the world’s largest gas-producing region. In addition, gas production in China, the Indian Subcontinent, and South East Asia will double.  

Power generation will be the primary consumer of gas in most regions, though manufacturing could require similar volumes in emerging markets. While demand for gas peaked in Europe in 2010, and is expected to do so in the early 2020s in North America, many regions, such as China and South East Asia, will peak only in the mid-2030s. 

Substantial investment in gas is needed

DNV GL’s 2017 Energy Transition Outlook, which will be updated in September 2018, predicts that the industry’s intentions for increasing gas investments will accelerate by the mid-2020s as major oil companies decarbonize their business portfolios.

In transport, as in power generation, gas is the energy-transition fossil fuel best positioned to cover capacity and applications for which zero-carbon technologies are not yet viable. 

“We see the future for cost-effective and low-carbon power generation as renewables plus gas. That’s something that is in the money now and needs to be built out pretty rapidly,” said Mark Gainsborough, executive vice president – new energies, Shell, in an interview for DNV GL’s 2018 Industry Outlook research. 

Hovem observed: “Significant investment will be needed in the gas industry over the coming decades to increase capacity, transform assets to source, and transport a decarbonized mix of energies. It will also be required to safely build and maintain the infrastructure needed to connect emerging supply regions with evolving demand centres.”  

Download a complimentary copy of Transition in Motion for further analysis on: 

  • The industry’s gas project investment intentions, including where spending will be focused to boost gas pipeline and LNG infrastructure
  • Projected shifts towards gas in the refining industry’s feed mix
  • How gas distributors are looking to evolve their infrastructure to play a key role in the decarbonization of energy.
References
  1. ‘Oil and gas forecast to 2050: Energy Transition Outlook 2017’, DNV GL, September 2017
  2. ‘Confidence and control: the outlook for the oil and gas industry in 2018’, DNV GL, January 2018
Figure 1: The global energy mix to 2050
Figure 1: The global energy mix to 2050
Figure 2: Top five drivers for investment in natural gas and/or LNG in 2018
Figure 2: Top five drivers for investment in natural gas and/or LNG in 2018

Disclaimer: 

DNV GL prides itself on providing accurate information but makes no claims or guarantees about the accuracy, completeness or adequacy of contents in this publication, and disclaims liability for any errors or omissions. The authors’ views here do not necessarily reflect DNV GL’s views.