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Report: Gas investments, like coal, could become stranded assets

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Creative Commons: Lock the Gate Alliance, 2011

With the coal industry’s fortunes terminally fading globally, a new report from the Carbon Tracker Initiative (CTI) is set to send a chill down the spine of gas market investors, with analysts finding that up to US $283 billion in Liquefied Natural Gas (LNG) projects to 2025 are likely to be surplus to requirements in a carbon-constrained world.

This includes $82 billion in Canada, $71 billion in the US and $68 billion in Australia.

Lead analyst at Carbon Tracker and co-author of the report, Andrew Grant said:

The size of the gas industry in North America could fall short of industry projections – especially those expecting new LNG industries in the U.S. and Canada. Avoiding the combination of U.S. shale gas being exported as LNG will be important if we are to use the carbon budget most efficiently, although efforts to improve efficiency and reduce leakage will be important. The economics shows UK unconventional supply will struggle to compete in the gas market over the next decade, and shale gas could only contribute a tiny volume if projects do go ahead.

Based on International Energy Agency scenarios, the report finds that huge growth in LNG will be unsustainable and uneconomic in a world working to limit global warming to less than 2C.

While the report does see some space for LNG in the near-term, it notes that gas companies have substantially overestimated future opportunity, and that there “is a limit to how many more decades of unmitigated emissions from new gas plants we can be locked into.

CTI also shows that unconventional gas – such as the the coal seam gas rush currently underway in Australia, or the shale gas boom seen in North America – have no place in the transition to a clean energy future.

While some have seen the writing on the wall, sixteen of the world’s top 20 LNG companies are considering major projects that are likely to be surplus to demand by 2025, creating not only a huge risk of stranded assets for investors, but money wasted on infrastructure that could be used more wisely for the inevitable clean energy transition.

This latest research adds further proof that investment in fossil fuels locks in infrastructure that will prove not only unnecessary, but increasingly economically and environmentally risky.

Today’s report builds on previous analysis from CTI that shows $1 trillion of investors’ money is being wasted on expensive, uneconomic oil projects, and $112 billion on coal projects that will never see the light of day.

Cheaper renewables, stronger energy efficiency measures, higher carbon prices and fluctuating energy prices mean leap-frogging over gas straight to renewables makes economic and climate sense.

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