The Growing Importance of LNG and Natural Gas for Economies, Climate Goals

As publicly traded companies released their earnings in October and November, it was clear that Q3 was a mixed bag. However, many companies in the oil and gas industry beat analysts’ estimates. It’s good news for the energy industry, and by most accounts, should continue into the new year. This year, companies had more to report on their earnings calls than just higher profits. Many companies are refocused on how they can make a positive social impact globally. Energy companies that produce or transport liquid natural gas (LNG) see an important opportunity to help bring cleaner energy to developing nations. 

That was one of the key aspects covered during Energy Transfer’s Q3 earnings call last month. Energy Transfer has invested significant resources into its Lake Charles LNG export project in Southwest Louisiana. Tom Long, Co-CEO of the company, said, “We believe that our Lake Charles LNG project will provide an important contribution toward solving the growing global energy demand.” A renewed emphasis on natural gas generation is one key to facilitating any energy transition and ensuring energy security worldwide.

Energy Transfer is leading this renewed emphasis by example. Compared to the same period in 2021, Energy Transfer’s natural gas liquids transportation volumes were up 5 percent, and midstream gathered volumes were up 47 percent, setting a new record for the company. It is evident that the organization is serious about emphasizing the importance of natural gas, especially as global natural gas liquid markets have tightened since 2021. In just the last eight months, Energy Transfer has announced six Sale and Purchase Agreements (SPAs) with different companies, bringing the amount of liquid natural gas contracted to flow from the Lake Charles export facility to 8 million tonnes per annum. The investment in the Lake Charles LNG export project exemplifies both the company’s commitment to helping allies supplement their energy needs in the future and helping developing countries stop their use of materials much worse for the environment, such as coal, wood, and biomass.

An all-of-the-above approach to adopting cleaner forms of energy should be a long-term goal globally. That said, a rushed shift from traditional resources such as fossil fuels to energy generation methods like wind and solar will backfire on the consumer and is unrealistic for much of the world. The politically-led race to renewables in wealthy nations will have a devastating impact on the cost, reliability, and security of energy around the world – just as we’re seeing in Europe right now.

A blind drive towards green energy policies in Western Europe left them vulnerable during the war in Ukraine, leading to historically high energy prices and increasingly unstable energy security. In Europe, retail natural gas costs are now double what they were in October of 2021. While the price rises, EU countries are moving backward. For example, Germany is now turning back to coal-fired power plants. Jennifer Morgan, Germany’s special envoy for international climate action to the U.N. General Assembly, even called it “a hard pill to swallow.”

In the case of Germany, a greater investment in fossil fuels would’ve protected them from having to rely on high carbon-producing energy sources such as coal. Building more natural gas-fired generation is an important strategy for lowering emissions in developing countries as well. First-world countries like the U.S. and those in the EU are focused on becoming carbon neutral, while developing countries are still burning wood, garbage, and biomass. Moving towards a cleaner environment is a global issue. Extreme actions by Europe won’t matter if highly populated and developing countries don’t move towards cleaner sources of energy. Helping nations access LNG will drastically lower their emissions.  

Our EU allies and developing nations will welcome the completion and operation of Energy Transfer’s Lake Charles export facility. While natural gas can help supplement a lack of supply in Europe, it will also act as a buffer between far-off renewable energy and biofuels that developing countries currently burn. Renewable energy sources will eventually grow in scale and reliability. But for now, a renewed emphasis on natural gas from all companies across the U.S. can fill the void.

The U.S. government needs to support facilities like Lake Charles to help developing nations move away from high-pollutant materials such as coal or wood and towards much-cleaner LNG. We should be supporting the fossil fuel industry, not villainizing, divesting from, or obstructing it. Policy choices such as pausing federal oil and gas lease sales have discouraged investment from traditional fuel sources. This has resulted in fewer acres being leased in President Biden’s first 19 months in office job than any other U.S. president since World War II. 

Instead of short-sighted policy decisions, the administration should support energy infrastructure projects and lease sales across the country.

Hank Torbert

Innovative leader with over 20 years of experience developing and executing cross functional strategies to maximize revenue growth, expand EBITDA and increase shareholder value. Skilled at pulling the levers of finance, strategy, innovation and operations. Resourceful problem solver with a proven track record building and expanding early-stage to billion-dollar companies in the utilities, energy, manufacturing, technology, transportation and financial services sectors. Specialties: corporate strategy, business development, operations management, corporate divestitures and restructuring, investment selection and analysis, due diligence and financial engineering

Read Previous

All Private 5G Is Not The Same: Interview with Todd Krautkremer, CMO at Cradlepoint

Read Next

Challenging Choices for Private 5G Networks