At the COP28 conference last month, climate activists were perhaps the most numerous demographic.
Normally, this demographic focuses either on oil and coal or all three hydrocarbons, including gas. This time, a group of activists had a much more specific target: liquefied natural gas. Even more specifically, the target for 250 activist organizations was U.S. LNG.
Last year, the United States became the world's largest LNG exporter, dethroning Qatar and Australia. It took the U.S. a little over a decade to do that, thanks to the shale boom that led to a surge in domestic gas supply. It was this abundance of supply that made it possible to turn the country into the world's largest exporter.
The industry is not stopping, either. There are plans for more capacity in the coming years as demand for gas—and specifically LNG—remains robust despite pessimistic forecasts from the International Energy Agency.
In this context of fast capacity growth, it was really only a matter of time before activists set their sights on LNG. According to one group representing people from poor communities on the Gulf Coast, the LNG industry expansion adds insult to injury for those who already live in the shadow of the massive Gulf Coast petrochemical industry and pay for it with their health.
They call the Gulf Coast a "sacrifice zone," which until recently was dominated by the massive refineries that turn the crude oil into fuel and petrochemicals. Now, the LNG trains turning gas into liquid to be sent across the world have been added to the targets.
"Because of what happened in Ukraine [they say] that American gas is freedom gas — we're no longer being held hostage by Russia. Well we have a saying in the states: freedom ain't free . . . The price we pay for it is pollution," former refinery worker and community activist John Beard told the Financial Times last November.
At the COP28 event, activists were blunter: they directly called on the Biden administration to stop approving new LNG facilities.
"We urge the Biden administration to publicly commit during COP to no further regulatory, financial, or diplomatic support for LNG in the United States or anywhere in the world," the group said in a letter to the White House.
This new gas-focused pressure is a tricky one for the Biden admin. It came into office with an ambitious climate change agenda, and it has largely stuck to it—with some notable exceptions, including LNG capacity approvals and the Willow oil project in Alaska.
That's not all, either. The Biden admin has essentially celebrated LNG—as did Europe until it saw the bill—as a means to reducing geopolitical allies' dependence on the new arch-enemy, Russia. This was bound to cause a stir among activists who happen to constitute a significant portion of Biden's voting base.
On a more practical level, it is all just another instance of the battle between climate targets and market forces. Climate targets dictate a phaseout of all hydrocarbons, even gas, which is the smallest emitter. Market forces dictate energy security, which hydrocarbons provide. Reconciliation of these two is, to put it mildly, challenging.
"The big question is: should the government step in to limit construction of new LNG facilities, or should it let the market decide if there is sufficient gas demand and financing for these projects to be built?" Ben Cahill, senior fellow at the Center for Strategic and International Studies, told the FT back in November. "So far, the latter approach has worked well, but it's getting harder to sustain."
In other words, for now, market forces are winning, but they won't keep winning forever if governments—and specifically the U.S. government—are serious about the energy transition. It's election year. Biden is running for re-election. His approval ratings are already dismal. Now, activists who typically vote Democrat are pushing for action against the LNG buildout that politicians widely consider to be a big positive for the U.S. as a global economic power.
It's a tough spot to be in, torn between transition and energy security. The two appear irreconcilable, and indeed, they are at this point. If the transition away from hydrocarbons worked as intended, Germany, for instance, would not need so much gas with its massive wind and solar generation capacity.
Yet the transition has not worked as intended, and even the most active builders of wind and solar have found themselves still very much dependent on oil and gas. And thanks to the U.S. and its LNG buildout, they have been able to secure the gas they need from a jurisdiction with which they don't have a geopolitical beef—an important public image consideration in this day and age.
Global natural gas demand is set to continue growing for the foreseeable future. LNG is the most convenient form of gas transport-wise. Demand for it will also grow in the coming years and likely decades unless activists prevail. If they do, it will be a major win for non-U.S. LNG producers.
By Irina Slav for Oilprice.com
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