A new report from Wood Mackenzie highlights the vital role of natural gas in the global energy transition, supporting renewable expansion and accelerating the shift away from coal.
The bridge: Natural gas’s crucial role as a transitional energy source report emphasises that natural gas remains fundamental to meeting global energy needs and reducing emissions in the medium term — despite the world’s increasing turn towards renewable energy.
Massimo Di Odoardo, Vice President of Gas and LNG Research at Wood Mackenzie, noted that gas demand has surged by 80 per cent over the past 25 years, now meeting almost a quarter of the world’s energy needs.
He attributed this success to the scale of global resources, low production costs, ease of storage and dispatch, and comparative environmental advantages.
The report highlights several key findings:
- Gas produces only half the carbon dioxide of coal and 70 per cent of oil when burned, making it the cleanest fossil fuel option.
- Replacing coal with natural gas has already helped deliver substantial CO2 reduction and can help decarbonise coal-dependent markets across Asia.
- Gas-fired plants are crucial for providing reliable and flexible supply to support the integration of intermittent renewable energy sources.
- Natural gas can catalyse the advancement of other lower-carbon technologies, including carbon capture and storage (CCS) and low-carbon hydrogen.
Despite these advantages, the report also outlines challenges facing the gas industry.
High LNG prices since 2022 risk undermining the full potential of wider gas adoption in Asia.
The report suggests that carbon prices would be needed to shift the market.
Di Odoardo pointed out that in China and India, gas demand is expected to grow by almost 100 bcm through to 2050 in the power sector, offering the most practical option for ensuring flexibility as renewable investments surge.
However, he emphasised that without a carbon price of around US$100/tonne, reducing these countries’ dependency on baseload coal would be challenging.
The report also addresses emissions concerns, stating that claims of LNG being more GHG-intensive than coal are unfounded.
According to the analysis, LNG has, on average, around 60 per cent lower GHG intensity than coal.
Even when considering a 20-year global warming potential and comparing methane-intensive LNG with coal burnt in highly efficient plants, LNG is still 26 per cent less GHG-intensive.
The report asserts that natural gas, particularly LNG, will play a critical role in the shift to a lower-carbon future, bridging the gap as emerging low-carbon technologies strive to reach critical mass.
