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Rising gas demand through 2040 needs $2 trillion in capital - Woodmac

Jessica Jaganathan
·2-min read
A LNG tanker is tugged towards a thermal power station in Futtsu
A LNG tanker is tugged towards a thermal power station in Futtsu

By Jessica Jaganathan

SINGAPORE (Reuters) - Rapid gas demand growth expected through 2040 as countries implement clean air policies will require capital of $2 trillion (£1.5 trillion) to develop about 200 billion barrels of oil equivalent of new gas resources, consultancy Wood Mackenzie said.

Asia's gas demand is growing by an average of nearly 3% a year over the next two decades with gas demand expected to double in China and India by 2040, as current low prices boost pro-gas policies, the company said in a white paper released on Thursday.

This in turn will need about $1.36 trillion of capital investment to bring both discovered reserves and yet-to-find resources on-stream with proposed liquefied natural gas (LNG) projects requiring another $0.6 trillion, WoodMac said.

However, a Paris Agreement goal of limiting a rise in average world temperatures to well below 2 degrees Celsius before the end of the century, could see gas demand peaking earlier and "dramatically alter this outlook" and require a much lower capital of $700 billion of new investment, it added.

As investors globally increasingly focus on low-carbon projects, the gas market's carbon intensity will come under scrutiny, WoodMac said.

Though burning natural gas emits less planet-warming carbon dioxide than coal per unit of energy produced, climate scientists have warned that the industry's rapid growth as well as leaks of methane – a potent greenhouse gas – threaten progress in limiting climate change.

LNG buyers in Asia are increasingly asking for more transparency on carbon emissions with some requesting for carbon-neutral deliveries.

"Future legislation and project finance will likely require that all LNG cargoes come with detailed information about the emissions associated with their production and delivery," the WoodMac analysts said.

(Reporting by Jessica Jaganathan; editing by David Evans)