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As the world’s energy system shifts from fossil fuels to cleaner sources of power, there is one fossil fuel that has clung to relevance as the market transitions: natural gas.
Enjoying a less troubled reputation as the least polluting fossil fuel when burned, gas has been dubbed a “bridging” fuel in the energy transition, a narrative enthusiastically told by fossil fuels companies worried about tightening climate policies and increasingly competitive sources of clean energy that cast doubt over the fuel’s long-term economic viability.
One such company is Petroliam Nasional (Petronas), Malaysia’s US$150 billion state-owned energy giant, the world’s ninth largest oil and gas company. “Natural gas is the cleanest burning fossil fuel and a complimentary fuel to address intermittency issues faced by renewables,” says Abang Yusuf Abang Puteh, the company’s vice president of liquid natural gas (LNG) assets.
This narrative is influencing policymaking at a critical time for tackling the climate crisis. Demand for gas is expected to remain resilient globally, even under energy transition scenarios that call for a rapid phase-down of fossil fules.
Decarbonisation commitments will hasten demand decline in mature markets like Europe and North America, but in Asia, which accounts for almost three-quarters of global LNG imports currently, demand is unlikely to wane.
Asia is expected to account for 60 per cent of global gas demand growth over the next three decades, and by 2050, a third of the world’s gas will be consumed by the region – up from about a fifth in 2020.
Though climate-harming impacts from the production, transport and consumption of natural gas trouble environmentalists as much as coal or oil, the fuel’s future looks relatively stable. While lawmakers in the United States consider statewide bans on natural gas connections in new buildings in response to the climate crisis, the European Union plans to label natural gas as “green” — for a limited period, if they replace dirtier fossil fuels — in its new taxonomy for sustainable finance.
Companies like Petronas, which only recently started to diversify its portfolio by investing in renewable energy, will benefit from the energy transition, as long as gas is held up as a “bridging” fuel. Malaysia is the world’s third largest export of LNG, and income from Petronas made up about a third of public revenue in 2019.
