Demand for liquefied natural gas (LNG) continues to rise, contradicting earlier predictions that the shift towards renewable energy would diminish the need for fossil fuels. Major oil companies are responding by significantly expanding their LNG operations, a move that has raised concerns among advocates for energy transition.
Several leading oil firms, including Shell, TotalEnergies, BP, Exxon, and Chevron, have reported strong quarterly earnings, highlighting the importance of LNG in their business strategies. In a recent report, CNBC noted that these companies are doubling down on their LNG investments as global electricity demand is projected to soar, primarily driven by the rise of artificial intelligence and its energy requirements.
Investment Plans from Industry Giants
In the past two months, Shell announced plans to increase its LNG capacity by 12 million tons by 2030. Similarly, TotalEnergies aims to enhance its LNG trading and projects, targeting a 50% increase in volumes managed by the same year. BP has embarked on a new LNG initiative off the coasts of Senegal and Mauritania, with ambitions to develop these countries into significant LNG hubs.
Other major players are also making ambitious moves. Exxon is looking to boost its LNG assets by 50% by 2030, while Chevron is pursuing further global expansion in its LNG operations. Despite these aggressive strategies, some analysts caution that this focus on LNG may be a risky long-term bet.
Forecasts and Realities of Natural Gas Demand
Forecasts from various sources, including the International Energy Agency (IEA), suggest that demand for natural gas could peak before 2030. These projections often come from organizations advocating for renewable energy transitions, which may influence their outlook. Nonetheless, the IEA recently indicated that global demand for natural gas, particularly LNG, is expected to rise, with growth anticipated to accelerate starting in 2026.
In particular, the IEA predicts a 7% increase in LNG supply in 2026, translating to an additional 40 billion cubic meters (bcm), driven by new projects in the United States, Canada, and Qatar. This anticipated growth challenges the narrative of a declining fossil fuel sector, especially considering the persistent demand for natural gas in regions such as Europe.
Data from the European Union indicates that despite significant investments in wind and solar energy, natural gas demand remains robust. In the first quarter of 2024, the EU reported a 3.4% increase in carbon dioxide emissions compared to the previous year, attributed largely to heightened electricity generation from coal and gas sources. This uptick occurred alongside a 1.2% growth in the EU economy, suggesting that wind and solar technologies have not yet fully met the region’s energy needs.
The International Monetary Fund has highlighted that electricity consumption by data centers, which is expected to rival that of India by 2030, is driving urgent demand for reliable, dispatchable electricity. Such energy requirements are best met through gas-powered stations, coal plants, and nuclear reactors—further solidifying the role of natural gas in the energy landscape.
Critics of the expanding LNG market argue that increasing reliance on natural gas undermines the goals of the energy transition. The rise in demand for LNG, coupled with the emissions data from the EU, raises important questions about the feasibility of current energy transition targets. As the realities of energy demand evolve, it may be necessary to reassess these goals to better reflect actual market conditions and energy supply dynamics.
