Fossil fuel players asserting natural gas as the fuel of the future

Major fossil fuel players are boldly asserting that natural gas will play a pivotal role in the transition to a greener future. Industry leaders such as Shell and Chevron are ramping up investments in natural gas, challenging the perception that it is a short-term bridge to renewable energy sources. This shift marks a turning point for natural gas, once seen as a temporary solution. Now, gas demand is expected to persist for decades to come.

The confidence in natural gas stems from a series of geopolitical events and market dynamics. Russia’s invasion of Ukraine and subsequent energy crisis have prompted Europe to expedite efforts to reduce reliance on Russian fuel. Simultaneously, emerging nations are signing long-term agreements to secure natural gas and avert future energy shortages. These factors have encouraged natural gas sellers, who are confident in the long-term demand for the fuel.

Natural gas has proven to be a profitable venture for energy companies like Shell and BP, while renewable energy targets have faced certain challenges, as per Bloomberg. As a result, these companies are reevaluating their investment strategies. Shell, for instance, plans to increase its natural gas investments by 25 per cent this year, reaching a record $5 billion. The pursuit of lower-margin renewable power investments is being reconsidered in light of lackluster returns.

However, it is to be noted that, natural gas demand must decline significantly to meet emission reduction targets and achieve net-zero status by 2050. Methane emissions, a byproduct of gas production, remain contentious due to their potent greenhouse effect. Major energy companies are committed to reducing methane emissions to mitigate these concerns. Shell, Exxon Mobil, and several others have pledged to achieve “near-zero” methane emissions by 2030 through a joint initiative.

While the momentum in favor of natural gas continues to build, debates persist regarding the extent of gas demand and investment needed. The International Energy Agency (IEA) asserted that gas demand must decrease dramatically by the end of the decade to stay on track for a net-zero future. The IEA also advocates for ceasing new developments in oil, gas, and coal fields to align with emission reduction goals. However, the fossil fuel industry maintains that natural gas offers a cleaner alternative to coal, emitting approximately 50 per cent less carbon emissions when used for electricity generation.