The Natural Gas Industry

Introduction

A tanker carrying liquefied natural gas (LNG) from Russia arrives at a storage facility near Tokyo in 2009. The global market for LNG has been growing over the past decade but faces numerous challenges. (AFP/Getty Images/Jiji Press/STR)

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Overview

In Gibbstown, N.J., residents worry that trains carrying highly flammable liquefied natural gas (LNG) will soon pass regularly through their town to a port on the Delaware River, where the fuel will be exported overseas.

Critics of the project, which includes building a facility in Pennsylvania to liquefy natural gas from nearby fracking fields and then transporting it overland, call the rail cars “bombs on wheels” due to the risk of explosions. The project was approved in December, a decision that could open the door for the now-banned railway transport of LNG nationally.

Farmland surrounds a fracking site in Scenery Hill, Pa., in October. Plans to transport LNG by rail from Pennsylvania have encountered pushback from environmentalists and local communities worried about accidental explosions. (AFP/Getty Images/Nicholas Kamm)

“It's so dangerous,” said resident Dave Rogers of the project. “I've got to sell my house. I've got to move away,” said Rogers, who has lived in Gibbstown in southern New Jersey for decades.1

But the project's supporters say it will provide jobs and increased flexibility in the LNG sector, which has enjoyed rapid growth in recent years and has enabled the United States to become a major gas exporter. The nation was on track in 2020 to be a net energy exporter for the first time in more than 70 years.2

In its gaseous form, natural gas — a major fossil fuel, along with oil and coal — can be transported only via pipelines, which are limited by distance and geography. But LNG — natural gas that has been cooled to at least minus 260 degrees Fahrenheit, reducing its volume by about 600 times — can be transported long distances, usually on ships. Regasification facilities turn it back into its gaseous state upon arrival at its destination, where it is distributed over local pipeline networks.3

The debate in Gibbstown is emblematic of the promise and perils in the natural gas industry. Increasing demand for cleaner-burning energy, more gas discoveries and improved extraction technology that includes fracking — drilling thousands of feet underground and injecting a mixture of chemicals to extract oil and gas — have driven sharp growth in both LNG and the gas sector over the past decade.

Gas is also playing a larger role in the global energy market, economy and politics. But the sector is currently suffering a downturn in both price and demand because of the COVID-19 pandemic, and it faces an uncertain future with a growing number of countries adopting or considering policies that favor renewable energy over fossil fuels.

In the United States, President-elect Joe Biden has vowed to put the country on a path to achieve net-zero carbon emissions by 2050. He has said he will strengthen the limits on methane, a greenhouse gas, emitted during the production and transportation of natural gas.4

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But at the same time, natural gas is emerging as the fuel of choice to provide backup power at wind and solar plants when the wind is not blowing or the sun is not shining — a solution until better storage systems are developed for renewables.5

“Overall, gas is very abundant and has proved to be a good all-around fuel, although it's not as cheap as coal and it's not as clean as renewables,” says Patricia Roberts, managing director of LNG-Worldwide Ltd., a London-based industry consulting firm. “But there are a lot of unknowns at the moment, and you have massive uncertainty about future energy transitions.”

A natural gas and oil refinery lights up the early morning sky in Bismarck, N.D. Large gas discoveries in North Dakota and other states allowed the United States to become an energy exporter in recent years. (Getty Images/Andrew Burton)

Until the pandemic hurt demand, the natural gas sector had grown impressively:

• It was the fastest-growing fossil fuel in 2019, and the only one expected to see growth beyond 2035.6

• Natural gas is on track to overtake coal as the second most popular energy source after oil by 2030, largely because it is a cleaner option than coal: It produces up to 60 percent less carbon dioxide than coal for generating electricity and between 15 percent and 20 percent less greenhouse gases than gasoline-powered cars.7

• The world has enough known natural gas reserves to last another 53 years, compared with 51 years for oil.8

LNG, meanwhile, has created a more interconnected and competitive marketplace for gas. Countries with large reserves of natural gas, including the United States, Qatar and Australia, are increasingly finding overseas markets for excess gas and selling it as LNG — especially to China, South Korea and Japan.9 The United States is the world leader in gas production.10

LNG, as a result, experienced rapid growth in recent decades:11

• The volume of LNG traded globally quadrupled between 1996 and 2016, resulting in a more competitive market worldwide.

• The number of countries importing LNG totaled 43 in 2019, up from 23 in 2009; Qatar alone exports more LNG than all countries combined did in 1995.12

• About half of the LNG produced globally in 2019 went to make electricity; nearly a quarter was used to power vehicles.13

• The United States is on track to become the world's leading LNG exporter by 2024, with a record $65 billion committed to new LNG liquefaction facilities in 2019. In 2015, the nation's LNG production was near zero.14

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The increase in trade has been driven in part by improved technology, such as floating regasification and storage terminals, which can anchor in ports and connect temporarily to local gas grids, eliminating the need for building permanent onshore LNG facilities.15

“Demand can be [met] much quicker than it was done in the past,” said Melissa Lindsay, CEO of Emsurge, an online LNG trading platform.16

These developments have “raised the profile and importance of LNG in international relations,” says Steven Miles, a nonresident fellow at the Baker Institute's Center for Energy Studies at Rice University. “LNG exports are an important tool in the U.S. government's toolkit.”

For example, the State Department has referred to LNG exports to Europe as “freedom gas,” because they could reduce the Continent's reliance on gas from Russia, a political rival.17 Miles says that American LNG also offers an alternative to the coal plants that China is building outside its borders as part of its infrastructure projects known as the Belt and Road Initiative.

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LNG's enhanced role globally has raised the stakes in the United States over fracking — formally known as hydraulic fracturing — and other environmental aspects of the natural gas industry. While fracking has been largely responsible for the increase in U.S. gas production, opponents of the process say it damages the environment by causing earthquakes, contaminating water supplies and harming air quality.18

But its proponents say fracking is critical to the economy and to energy security. Analysts estimate the fracking industry was worth $28.13 billion in 2019. Banning fracking would eliminate 4 million jobs in 2021 and 19 million jobs by 2025, according to the U.S. Chamber of Commerce's Global Energy Institute.19

Many scientists say the environmental effects of fracking are unclear. “This is one of those issues where there's just so much gray,” said Sam Ori, executive director of the Energy Policy Institute at the University of Chicago.20

The Trump administration has been a vocal supporter of fracking, especially in electoral battleground states with large fracking industries, including Pennsylvania and Ohio. But Biden has sent mixed messages on the issue, denying he would prohibit it outright while suggesting he might institute a ban on new fracking projects on federal land. Some liberal Democrats are pushing for a total ban on fracking and halting exports of all fossil fuels.21

Tokyo Gas built the world's largest underground LNG tank in 2013 in Kanagawa Prefecture, Japan. The tank stores enough LNG for 360,000 households. Since the late 1960s, Japan has relied on overseas shipments from Alaska and other places. (Getty Images/The Asahi Shimbun/Contributor)

“It is unlikely that Biden would actively try to damage the gas industry during an economic crisis,” says Henning Gloystein, director of energy, climate and resources at the Eurasia Group, a political risk and consulting firm, explaining that the ongoing COVID-19 pandemic and a potentially divided Congress would likely prevent immediate steps against fracking or other parts of the oil and gas industry. Biden's presidency “will raise green energy policy support and slow fossil fuel momentum,” says Gloystein.

With concerns about climate change accelerating, the gas sector faces other questions about its environmental impact. Although it burns cleaner than coal, natural gas still made up about 33 percent of the total carbon dioxide emissions in the U.S. energy sector in 2019.22 State-level policies mandating lower carbon emissions in the energy sector could reduce the use of gas in favor of renewable sources. And the falling cost of renewables, including solar, could make them more attractive to consumers and industries than natural gas.

Some projections, as a result, see natural gas starting to decline in the coming decade, in favor of cleaner, and eventually cheaper, renewable sources.23

“Gas is not going anywhere at the moment,” says Nikos Tsafos, deputy director and senior fellow at the energy security and climate change program at the Center for Strategic and International Studies, a Washington think tank. “But carbon constraints will eventually hit gas, even if in the short term gas may benefit because it is replacing coal.”

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Background

Early Days

Natural gas, often a byproduct of oil drilling, was long relegated to being a “poor relation” of the energy industry, according to research fellow Jonathan Stern and energy economist Adi Imsirovic. Energy companies mainly sold gas to the local market or left it in the ground if it was too far or expensive to ship to potential consumers.24

It was only upon discovering several large but remote reserves of natural gas in the late 1950s and '60s, and facing political pressure to diversify fuel sources, that European and U.S. energy companies began the first projects liquifying gas for transport to broader markets.25

But because of the large investment needed to build infrastructure, including liquefaction and regasification facilities, and the reliance on long-term contracts, LNG did not immediately transform gas into a commodity like oil.26

Anti-pollution laws in Japan in the late 1960s boosted the nascent global trade of LNG, with Japan importing large amounts from Alaska.27

Around the same time, the United States began to import LNG from Algeria to make up for shortfalls in gas supply during peak winter use along the East Coast, which was served poorly by pipelines from gas-producing regions.28

Through the 1970s, American imports of LNG increased and large energy companies invested in the specialized infrastructure needed to receive it and turn it back into gas. The rise was driven by worries about dwindling local gas supplies and global energy uncertainty in the years following the 1973 oil embargo by Middle East producers and other events.29

Motorists wait in line to buy gasoline in New York City during OPEC's 1973 oil embargo. The embargo spurred the United States to seek alternative energy sources. (Getty Images/NY Daily News Archive/Harry Hamburg)

Federal policy, however, began to discourage LNG imports and treat them as an option of last resort, due to worries about imported gas pushing up local prices. The nation's LNG imports, as a result, dwindled in the 1980s. Meanwhile, LNG demand continued to grow steadily in the Pacific region, with Japan and South Korea, which lack significant local gas reserves, increasing imports for generating electricity and powering industrial plants. These imports mainly came from others in the region, including Australia, Indonesia and Brunei.30

Discovery of Large Reserves

It was only in the late 1990s and early 2000s, when giant gas reserves were discovered in the Persian Gulf country of Qatar, that the industry began to see significant growth. Rising concerns about carbon emissions from coal-fired power plants, combined with dropping costs for producing and transporting LNG, resulted in more demand globally. With Qatar exporting to both Europe and Asia, prices in geographically distant and separate LNG markets began to converge, and competition increased.31

During this time, the United States feared its domestic gas supply was insufficient, and President George W. Bush began a controversial campaign to ramp up LNG imports. Many opposed the plan, citing the potential for explosions in ports receiving the fuel and increased exposure to supply disruptions from foreign policy disputes.32

However, large domestic gas and oil discoveries later that decade, mainly from fracking in states such as Colorado and North Dakota, quickly eliminated the need for imports. Between 2006 and 2016, U.S. natural gas production grew almost 50 percent and prices fell by half.33

This abundant and cheap gas spurred electricity generation plants to switch from coal to cleaner-burning gas, with more than 500 coal-fired plants closing in the United States between 2010 and 2019. The closures contributed to an overall drop in carbon emissions.34

The United States began exporting gas in its liquified state, able to reach distant markets at decent returns due to abundant and cheap production. Flooding a rapidly expanding global market with supply, the United States became the world's third-largest gas exporter by 2019. This expansion has put U.S. gas in direct competition with Russia, the world's second-largest gas producer, and provided another source of natural gas to rapidly growing markets in Asia.35

“The United States has been responsible for significantly increasing world gas and LNG supply,” says John Madigan, analyst at market research firm IBISWorld.

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Current Situation

Falling Prices, Demand

In the global gas sector, the coronavirus pandemic is exacerbating three pre-existing problems: falling prices, oversupply and challenges in how LNG is sold.36

Global gas demand is on track to fall about 3 percent in 2020, its biggest drop in at least 50 years, due mainly to the effects of the virus. The pandemic-related recession has slowed parts of the world economy, such as manufacturing, that are powered by gas.37 Gas prices are also low, hit both by the drop in demand and the supply glut.

Workers install a natural gas pipeline in Berthoud, Colo. A boom in gas production has meant that “we've got demand and supply moving in opposite directions,” says John Madigan, analyst at market research firm IBISWorld. (Getty Images/The Denver Post/Craig F. Walker)

“We've got demand and supply moving in opposite directions,” says Madigan. “But it does mean we are seeing more motivation to switch from coal to gas now that gas is cheap.”

Rather than grow slightly, as expected before the pandemic, the volume of LNG shipped in 2020 will be about the same as in 2019, says Roberts, managing director of LNG-Worldwide. Previously signed long-term contracts and strong demand in Asia, where the pandemic has not stunted demand as sharply as in other regions, has prevented a decline, Roberts says.

“LNG volumes have stood up quite well, but the margins have been quite affected as prices have fallen dramatically,” she says. Oversupply and low prices are further accelerating trends in how LNG is sold. Roberts says sellers are facing increased pressure to abandon traditional long-term contracts that led to higher and more stable prices in favor of spot trading. “Buyers are starting to have more power, which is normal as an industry grows,” she says.

Globally, the LNG industry is seeing the fastest growth in demand in Asia, especially in China, where government policies to reduce reliance on coal are creating more demand for gas, at least in the short term. China is expected to surpass Japan to become the world's largest buyer of LNG by 2022.38

But an ongoing trade war, started in 2018 when the Trump administration slapped tariffs on some Chinese goods, causing China to retaliate, is keeping the United States from selling large amounts of LNG to China. With Biden's election as president, there is still uncertainty but also some hope: U.S.-based Cheniere Energy signed a deal in November to supply the first American LNG to China in more than a year.39

“The U.S. may play a role in China if bilateral relations between Beijing and Washington improve,” says the Eurasia Group's Gloystein. “If they don't improve, China will be reluctant to increase its energy reliance on a geopolitical rival.”

Meanwhile, the United States continues to oppose the Nord Stream 2 pipeline under construction in Europe that will bring Russian natural gas to Germany. Washington is trying to stall the project by threatening economic sanctions — approved recently by Congress in a bipartisan initiative pushed by Ukrainian lobbyists — on companies that work on the pipeline. The United States is reluctant to let Russia, which has already been sanctioned for invading Ukraine, control key energy sources of American allies in Europe.40

Environmental Challenges

The gas industry is facing growing pressure to reduce its environmental impact, with recent studies showing that gas extraction and distribution emit much more methane than thought. This comes after researchers concluded that more than 2 percent of the methane-rich natural gas harvested by fracking leaks into the atmosphere during the process, and scientists studying Arctic ice cores have traced more methane emissions to the oil and gas production industry.41

“When you factor in methane emitted during the extraction and distribution of natural gas, climate advantage shrinks substantially,” says Robert Jackson, an earth system science professor at Stanford University and the chairman of the Global Carbon Project, an international research group focused on greenhouse gases and climate change.

Some analysts say natural gas production is now at its peak, with more than half of U.S. states, many European countries and China adopting legal or voluntary measures to reduce carbon output.42

Climate activists gather outside the Supreme Court in February to protest plans to build a natural gas pipeline underneath the Appalachian Trail in Virginia. The court ruled that the pipeline could proceed, but the companies involved canceled the project, citing litigation costs. (Getty Images/Mark Wilson)

“The image of gas has changed, especially in the progressive wing of the Democratic party,” says the Center for Strategic and International Studies' Tsafos.

As with coal and oil, views on natural gas often “reflect broader political divides in the debate over climate and energy issues,” says Brian Kennedy, senior researcher focusing on society and science at the Pew Research Center, a nonpartisan Washington think tank. Republicans generally support fracking while many Democrats do not.

Environmentalists' complaints about fossil fuel production are having an impact. Large power provider Dominion Energy, for example, is selling off its natural gas infrastructure amid worries that the company could be subject to lawsuits if the government dictates growing use of renewables, and major gas turbine makers are increasingly working to make hydrogen-burning equipment.

“Investment in gas transmission and storage has become increasingly litigious, uncertain and costly,” said Tom Farrell, Dominion's executive chairman. “This trend, though deeply concerning for our country's economic growth and energy security, is a new reality, which threatens the pace at which we intended to grow these assets.”43

Two major energy companies this summer canceled a gas pipeline that would have run underneath the Appalachian Trail in Virginia, citing ballooning litigation costs.44

And despite receiving approval in December, the proposed LNG terminal in New Jersey, which would also require overland transport of gas from fracking fields in the region, still faces opposition from environmental groups over safety and environmental questions.

“We will continue to fight,” said Jeff Tittel, director of the New Jersey Sierra Club. “People of the region and Puerto Rico [where some of the LNG could go] don't want this disastrous project.”45

In the LNG sector, multinational companies Total and Siemens are launching a project to develop technology to more cleanly produce LNG through more efficient equipment, heat-recovery technology and use of renewable energy. Some LNG sales contracts, including those involving divisions of Royal Dutch Shell, are starting to include the purchase of carbon offsets — investments in reforestation or renewable energy projects that will remove carbon from the atmosphere to make up for carbon created through the production and transportation of LNG.46

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Outlook

A Slow Rebound

In the short term, the International Energy Agency expects demand for gas, including LNG, to recover when the coronavirus pandemic fades. A cold winter could also boost prices in the Northern Hemisphere.47

Trade in LNG, according to a recent International Energy Agency forecast, will likely grow about 21 percent through 2025, boosted mainly by growing demand in Asia, where fast-growing economies in India, China and elsewhere will need more gas as they transition from coal to meet carbon reduction targets. As renewable energy plays a bigger role in power production, that development will also increase the use of gas, as it is seen as the best backup fuel to use at solar and wind plants — at least in the short term.48

“Gas is an essential part of the transition,” said Rachel Kyte, former U.N. special representative for sustainable energy.49

But the recovery and growth of the LNG sector will no longer depend solely on the control of gas supplies and other factors, energy analysts say. Carbon reduction, lowering costs by developing better technology and investment in power plants and pipelines will also be critical.50

“What will separate winners from losers will be an adaptive business model,” says the LNG-Worldwide's Roberts.

Another source of growth for the LNG industry will likely come from the shipping sector, with more gas-fueled vessels expected to come online as the industry seeks to reduce oil use and cut carbon emissions.51

Eventually, many forecasters see gas consumption peaking at some point in the next three decades, as more governments commit to reducing carbon output and the use of fossil fuels.52

But Tsafos of the Center for Strategic and International Studies says that much uncertainty about how and when this could happen remains, because some of the biggest uses for natural gas, including powering factories and heating buildings, do not have clear replacements that are cleaner.

“We don't really know what we will do without gas,” Tsafos says. “It will take a lot of effort to replace it.”

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Pro/Con

Is natural gas an environmentally sustainable long-term major energy source?

Pro Dave Schryver President and CEO, American Public Gas Association. Written for CQ Researcher, January 2021 Natural gas is a critical part of our nation's energy future. Thanks to its abundant and growing domestic supply, paired with its safe, reliable and efficient delivery system, natural gas is environmentally sustainable and a key piece to a balanced energy infrastructure in the long term. As distribution networks have expanded over the past few decades, natural gas utilities and their customers have led the charge in reducing greenhouse gas emissions. This unprecedented expansion of the nation's gas infrastructure, along with continuous efficiency increases and advancements in renewable energy sources, have led to energy-related carbon dioxide emissions hitting 25-year lows. And, since 1970, gas utilities have added more than 30 million residential customers with virtually no increases in emissions, providing customers across the country with energy that is three times as efficient as electricity at just one-third of the cost. With greater efficiency bringing gas from the source to the user — 92 percent compared with just 32 percent for electricity — the direct use of natural gas in the home for heating and cooking represents an opportunity to give customers nationwide access to a low-cost, clean-energy source while providing a pathway to continue reducing greenhouse gas emissions. While natural gas has contributed to reductions in global greenhouse gas emissions using new technologies, the industry continues to innovate ways to be even more efficient and sustainable, such as converting waste streams from landfills or agricultural sites to a usable energy source in residential and commercial applications. Natural gas' reliability and resiliency also provide clean and readily available energy when disasters strike — which is critically important for first responders, hospitals and senior living facilities. And while environmental factors often limit the reach of renewable resources, natural gas provides energy to homes when the sun isn't shining and the wind isn't blowing. Additionally, Americans' preference for natural gas underscores the need to include it in a balanced energy future. According to the Energy Solutions Center, an organization of energy utilities and equipment makers, nearly 70 percent of new homeowners nationwide prefer natural gas to meet their home energy needs over electric appliances. The reliability, safety and affordability of the direct use of natural gas make it an appealing option for residential customers, especially as households with all-electric appliances pay over $900 a year more than those using a traditional mix of gas and electric. Natural gas is an efficient, resilient and affordable energy source that is fundamental to achieving a diversified and sustainable energy future.

Con Robert B. Jackson Earth System Science Professor, Stanford University, and Chair, Global Carbon Project. Written for CQ Researcher, January 2021 Natural gas has many advantages as an energy source. It is abundant and is cheaper and cleaner than coal. Its use in power plants produces only half the carbon dioxide per unit of energy that coal produces, and little of the mercury, nitrogen and particulate pollution that kills millions of people each year. Natural gas is unabashedly the “cleanest fossil fuel.” Being the cleanest fossil fuel is no longer enough, though. To make natural gas an environmentally sustainable energy source, progress is needed in several areas. First, methane emissions from the extraction and use of natural gas need to be much lower than they are today. Methane, which makes up the bulk of natural gas, is 30 times more potent than carbon dioxide over a century. It isn't fair to take credit for all the carbon dioxide savings in switching from coal to natural gas but not acknowledge the higher methane emissions we're bearing as a result. The natural gas supply chain is unnecessarily and dangerously leaky. Second, natural gas use is growing rapidly. Despite being cleaner than coal, natural gas still yields greenhouse gases when burned — more than 7 billion tons of carbon dioxide pollution a year. Natural gas use is growing at 2½ percent annually. We can't reach the net zero emissions needed for a habitable planet by burning more fossil fuels. One way we could continue to burn some fossil fuels for power would be to capture their carbon dioxide emissions and store them underground. Unfortunately, costs and technological and social concerns have kept carbon capture and storage (CCS) from the marketplace. We need many more demonstration projects to convince people that widespread CCS is feasible. Third, we need more work on renewable natural gas, such as the “biogas” generated from landfills, agricultural waste and other sources. In theory, natural gas can be produced from excess capacity generated by renewable sources such as solar power, although the large scale needed is daunting. Why bother to do this? Because keeping some gas in the system would allow for large-scale energy storage in underground reservoirs during “dunkelflaute,” the dark power doldrums of winter. That is a long list, and it is why many environmentalists and energy experts believe sufficient progress is unlikely to happen fast enough to warrant the investments needed, especially when even cleaner and cheaper renewables are already available.

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Short Features

Natural Gas Fields Shake Up Mideast Diplomacy

In October, officials from Israel and Lebanon, along with U.S. mediators, met at a United Nations border post to discuss the exact location of their maritime boundary in the Mediterranean Sea, where large amounts of potentially valuable natural gas have been found in recent years.

It was the first time the two countries, still technically at war, met to talk about nonmilitary issues — and it only happened after much U.S. prodding, the details of which remain classified.1

“This is a win-win, if you can get the deal,” former U.S. Ambassador to Israel Dan Shapiro said, adding that the gas could help revive the struggling Lebanese economy. The gas reserves could be worth $6 billion annually.2

Although the talks stalled in November, the negotiations demonstrate how large gas finds are shaping cooperation — and raising tensions — in the region. The United States is watching developments closely, as gas from the region could be exported to Europe, providing an alternative to the Continent's heavy reliance on Russia for energy.3

“Washington is keen to encourage regional economic cooperation,” says Simon Henderson, a research fellow specializing in energy at the Washington Institute for Near East Policy, a pro-Israeli think tank.

Energy companies began finding large deep-water gas reserves in the region in the mid-2000s, with the largest discoveries off Israel, Cyprus and Egypt. In the past few years, some of those discoveries have entered the production phase, including two large fields off Israel, Tamar and Leviathan. Israel is now selling gas to Egypt and Jordan, in addition to supplying about 63 percent of its domestic electricity production.4

An offshore platform sits in Israel's Leviathan natural gas field in the Mediterranean Sea. The field has helped the Mideast nation become independent in energy. Israel also is exporting gas to Egypt and Jordan. (AFP/Getty Images/Jack Guez)

“The gas has been very important for Israel,” says Sarit Zehavi, CEO and founder of the Alma Research and Education Center, an Israeli think tank located near the country's border with Lebanon. “Israel has become independent in energy sources, and now even has others depending on it.”

Egypt, Israel and the Palestinian Authority, along with Greece, Italy and Cyprus, recently formed the East Mediterranean Gas Organization to cooperate on development of the industry and to transport the gas to Europe by underwater pipeline.5

“Today is an historic moment,” said Egypt's oil minister, Tarek el-Molla, at the signing in September. “Once the organization is up and running, we will soon see important projects that add value to all our countries.”6

But this cooperation has elevated tensions between Greece and Turkey, which is not part of the gas organization. Turkey recently carried out naval exercises and gas drilling in waters claimed by Greece, and it could mount costly international legal battles over gas rights. Turkey also has angered gas forum members by signing a deal with the Government of National Accord in civil-war-plagued Libya to cooperate on offshore gas exploration, as most members of the forum support the opposing side in the Libyan conflict. The European Union has recently suggested placing sanctions on Turkish companies and their partners who are drilling off Cyprus, in waters claimed by Greece.7

Analysts have warned the situation could turn violent, and they are calling for the United States and gas forum members to be more flexible toward Turkish membership.8 The presence of Greece and Cyprus in the forum, and their ongoing disputes with Turkey over general border issues and control of parts of Cyprus, have helped keep Turkey out.

In exchange for forum membership, “Turkey should contain its regional ambitions, bearing in mind that an armed conflict between these Mediterranean powers would be catastrophic,” writes Federica Saini Fasanotti, a nonresident senior fellow at the Brookings Institution, a Washington think tank.9

While tensions between Turkey and some its neighbors continue, the Israeli-Lebanese border issue remains unresolved. Neither country, as a result, can harvest the gas reserves in the disputed area, which is about 330 square miles. The lack of an agreement affects Lebanon, which has no other gas fields, more than Israel, which has several offshore fields.10

Israel and Lebanon have long been foes, most recently fighting a war in 2006. Lebanon's fragile government has the support of Hezbollah, an Iranian-backed group accused of being a terrorist organization.

But, initially, some analysts thought the countries could solve the border dispute, citing Lebanon's struggling economy, the continued economic and political fallout from a powerful chemical explosion in Beirut's port that killed hundreds in August, and increased U.S. pressure. The Trump administration imposed sanctions on Hezbollah's ally in parliament, the Amal party, which agreed to the talks despite the fact that it does not recognize Israel.

“Hezbollah is being cornered, even by its own allies,” said Nadim Koteich, a Lebanese political columnist and host on Sky News Arabic. But when the Lebanese side began asking for more territory, new land borders and access to more gas fields, Israel halted the negotiations, at least for now, with Israel's energy minister calling Lebanese demands “a provocation.”11

Zehavi, the Israeli think tank head, says that Israel also worries about Hezbollah profiting from the gas and using the revenue to fund its terrorist activities against Israel.

“This money will end up in the wrong hands,” she says. “And we could eventually end up with a stronger Hezbollah.”

Israel recently deployed a naval ship to guard its offshore gas rigs, with some officials citing threats from Hezbollah.12

But even if the political tensions dissipate and cooperation increases, some analysts still doubt the feasibility of harvesting enough Mediterranean gas to export to Europe, especially with gas prices falling globally.

“The amounts of gas so far discovered are not large compared with other parts of the Middle East and would have limited impact on European demand,” says Henderson, the energy analyst. “The pipeline proposal doesn't currently make commercial sense.”

— Sara Toth Stub

[1] Ben Hubbard, “Israel and Lebanon Begin Talks on Sea Border, with U.S. as a Mediator,” The New York Times, Oct. 14, 2020, https://tinyurl.com/y6eqndtp.

[2] Joshua Mitnick, “How a Maritime Deal With Israel Could Ease Lebanon's Woes,” Foreign Policy, Oct. 13, 2020, https://tinyurl.com/y87886e5.

[3] “Israel Accuses Lebanon of Changing Stance on Maritime Border,” Agence France-Presse, Barron's, Nov. 20, 2020, https://tinyurl.com/yaol5k53; John Psaropoulos, “Why Greece is key to US plans to sell more natural gas to Europe,” Al Jazeera, Jan. 7, 2020, https://tinyurl.com/y9rye4hg.

[4] Selcan Hacaoglu, “How Turkey Is Spoiling Its Neighbors' Big Gas Plans,” Bloomberg Businessweek, Dec. 10, 2019, https://tinyurl.com/trt459f; “Israel-Energy,” U.S. International Trade Administration, Dec. 3, 2019, https://tinyurl.com/yd3mqkoc.

[5] Hacaoglu, ibid.

[6] Salma El Wardany and Mirette Magdy, “Egypt, Greece, Cyprus Form Six-Member Mediterranean Gas Group,” Bloomberg, Sept. 22, 2020, https://tinyurl.com/y7ty8wzp.

[7] Laura Pitel and David Sheppard, “Turkey fuels regional power game over Mediterranean gas reserves,” Financial Times, July 19, 2020, https://tinyurl.com/y4mh2ngs; Stuart Elliott and David O'Byrne, “EU leaders pave way for additional limited sanctions on Turkey over gas drilling,” S&P Global, https://tinyurl.com/ybqqlvpc.

[8] Federica Saini Fasanotti, “The new, great dangerous game in the Eastern Mediterranean,” Brookings Institution, Aug. 28, 2020, https://tinyurl.com/y27rw6sz.

[9] Ibid.

[10] Timour Azhari, “Lebanon's first offshore gas drill is a huge disappointment,” Al Jazeera, April 27, 2020, https://tinyurl.com/y8peghcs.

[11] Mitnick, op. cit.; “Israel-Lebanon maritime border talks postponed, both sides say,” Reuters, The Jerusalem Post, Nov. 30, 2020, https://tinyurl.com/y4tuewya.

[12] “Israel gets missile boat to defend gas rigs, ‘dramatically’ help counter Iran,” Agence France-Presse, The Times of Israel, Dec. 2, 2020, https://tinyurl.com/y7hkt5jn.

Bibliography

Books

Jensen, James T. , The Development of a Global LNG Market , Oxford Institute for Energy Studies, 2004. An academic at a British research institute offers a rare in-depth history of the liquefied natural gas (LNG) industry.

Rhodes, Richard , Energy: A Human History , Simon & Schuster, 2018. A Pulitzer Prize-winning writer, historian and journalist outlines energy transformations throughout history, including the shifts from wood to coal and then to oil and gas.

Yergin, Daniel , The New Map: Energy, Climate and the Clash of Nations , Penguin Press, 2020. An energy expert and economic historian analyzes the relationship between technology, energy resources and geopolitics.

Articles

“IEA nudges up 2020 gas demand forecast, but still sees record fall,” Reuters, Oct. 12, 2020, https://tinyurl.com/y66sspbg. The International Energy Agency reports on how the coronavirus pandemic has dampened gas demand.

Aizhu, Chen, and Muyu Xu , “China on course for record LNG imports as industries recover, expand,” Reuters, Sept. 25, 2020, https://tinyurl.com/y65zzy8x. Two journalists provide an in-depth look at China's increased demand for liquefied natural gas.

Borunda, Alejandra , “Natural gas is a much ‘dirtier’ energy source than we thought,” National Geographic, Feb. 19, 2020, https://tinyurl.com/y2p2o27q. Recent studies show that the distribution of natural gas results in high levels of methane emissions.

Fasanotti, Federica Saini , “The new, great, dangerous game in the eastern Mediterranean,” Brookings Institution, Aug. 28, 2020, https://tinyurl.com/y27rw6sz. A think tank analyst explains some of the political issues involved in harvesting deepwater gas reserves in the Middle East.

Forrest, Brett , “U.S., Russia Race to Outflank Each Other on Russian Pipeline,” The Wall Street Journal, Nov. 29, 2020, https://tinyurl.com/y43pap5g. A journalist looks at U.S. attempts to stop a Russian project to export more gas to Europe.

Malik, Naureen , et al., “Peak Gas Is Coming to the U.S. Sooner Than Anyone Expected,” Bloomberg, Oct. 22, 2020, https://tinyurl.com/y4vculrr. The business news site examines how greener energy policies could reduce gas use.

Tabuchi, Hiroko, and Brad Plumer , “Is This the End of New Pipelines?” The New York Times, July 8, 2020, https://tinyurl.com/y7gywkum. Two journalists report on how environmental groups and policies favoring reduced emissions are making it more difficult to build gas and oil infrastructure.

Reports and Studies

“Global gas and LNG outlook to 2035,” McKinsey & Company, Sept. 4, 2019, https://tinyurl.com/y5vqogq5. The consulting firm looks at how the growing supply of gas is affecting price and other market fundamentals.

“Global Gas Report 2020,” Snam, International Gas Union and BloombergNEF, August 2020, https://tinyurl.com/y6ykq4la. A report examines recent trends and future projections for gas demand and trade around the world.

“World Energy Outlook 2020,” International Energy Agency, October 2020, https://tinyurl.com/y295vglk. The international agency reviews recent developments, including the coronavirus pandemic, and how they will influence the energy mix and demand in the near future.

Mitrova, Tatiana, and Tim Boersma , “The Impact of US LNG on Russian Natural Gas Export Policy,” Columbia Center on Global Energy Policy, December 2018, https://tinyurl.com/y8pr94ny. Two analysts examine how U.S. exports of liquid natural gas are creating competition for Russia.

Stern, Jonathan, and Adi Imsirovic , “A Comparative History of Oil and Gas Markets and Prices: is 2020 just an extreme cyclical event or an acceleration of the energy transition?” Oxford Institute for Energy Studies, April 2020, https://tinyurl.com/yxdtyqns. Two academics look at aspects of the gas market, including pricing, national strategic policies and the role of monopolies.

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The Next Step

Environmental Concerns

Germanos, Andrea , “ExxonMobil Lambasted Over ‘Grossly Insufficient’ Emissions Reduction Plan,” EcoWatch, Dec. 15, 2020, https://tinyurl.com/y95366rw. ExxonMobil will phase out flaring, or controlled burning, of natural gas by the end of the decade, but other aspects of its emission reduction plan disappointed environmental activists.

Leber, Rebecca , “These Ladies Love Natural Gas! Too Bad They Aren't Real,” Mother Jones, Dec. 14, 2020, https://tinyurl.com/yda5s6vr. A natural gas advocacy group funded by energy companies used fake testimonials, stock photos of women and a humorous Instagram account to push back against environmental concerns and negative perceptions of natural gas.

Morison, Rachel, Will Mathis and Jess Shankleman , “U.K. Targets Gas in Next Fight Against Fossil Pollution,” Bloomberg Green, Dec. 14, 2020, https://tinyurl.com/yd6hr9yf. To cut carbon emissions, the United Kingdom is considering burning more hydrogen gas to power the national electric grid.

Exports

Gardner, Timothy , “U.S. senator warns France's Macron over gas exports deal delay,” Reuters, Nov. 2, 2020, https://tinyurl.com/yb9hxe5w. French President Emmanuel Macron stepped in to delay the signing of a 20-year import contract between a French energy company and an American natural gas producer because of his concerns about the Trump administration's environmental rollbacks.

Lefebvre, Ben , “How Biden may save U.S. gas exports to Europe,” Politico, Nov. 27, 2020, https://tinyurl.com/yylq757l. If President-elect Joe Biden brings American gas regulations in line with stricter European standards, U.S. natural gas shipments could become more palatable to Europe.

Saefong, Myra P. , “Natural Gas Prices Outpaced Oil in 2020. Here's Why They Could Keep Rising,” Barron's, Dec. 11, 2020, https://tinyurl.com/yc4yzabx. Natural gas prices rose as U.S. production slowed during the COVID-19 lockdowns and could rise further, as economists predict overseas demand for liquid natural gas will continue to surge next year.

Federal Policy

Pager, Tyler, and Zack Colman , “Biden to tap former Michigan Gov. Granholm to lead Energy Department,” Politico, Dec. 15, 2020, https://tinyurl.com/y984e9by. President-elect Biden's pick for Energy secretary signals a focus on reducing carbon emissions and a shift away from the push by the current secretary, Rick Perry, to increase natural gas exports.

Roth, Sammy , “The ‘war on coal’ is over. The next climate battle has just begun,” Los Angeles Times, Nov. 17, 2020, https://tinyurl.com/ydy26ak4. Biden campaigned on 100 percent climate-friendly electricity by 2035, a goal that could knock natural gas off the power grid in 15 years.

Sanicola, Laura , “U.S. oil industry group pledges to fight possible Biden fracking limits,” Reuters, Nov. 23, 2020, https://tinyurl.com/y8rh7u7o. A fossil fuel group plans to use legal action to combat any Biden move to ban on fracking on federal lands.

Mideast

“IS claims Egypt-Israel gas pipeline blast that caused fire, but little damage,” The Times of Israel, Nov. 20, 2020, https://tinyurl.com/y8o5akz3. Gas pipelines are frequent targets of radical groups in the Middle East.

Foxman, Simone , “Qatar Set for Biggest Budget Deficit Since Gulf Spat in 2017,” Bloomberg, Dec. 10, 2020, https://tinyurl.com/y7w6uer4. Sagging energy prices will force Qatar, the world's largest exporter of natural gas, to run a budget deficit this year, despite recent annual surpluses.

Peshiman, Gibran Naiyyar, and Jessica Jagnathan , “Qatar Petroleum Trading participates in Pakistan LNG tender for first time,” Reuters, Dec. 11, 2020, https://tinyurl.com/y7m4j3dk. A Qatari company negotiated the sale of natural gas to Pakistan for the first time, a task the government usually takes up.

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Contacts

American Public Gas Association
201 Massachusetts Ave., N.E., Suite C-4, Washington, DC 20002
202-464-2742
apga.org/home
Trade organization representing publicly owned natural gas distribution systems in the United States.

Center for Liquefied Natural Gas
900 17th St., N.W., Washington, DC 20006
202-289-2253
lngfacts.org
Organization of six major liquefied natural gas (LNG) suppliers and others in the industry that advocates for policies favorable to LNG.

Columbia Center on Global Energy Policy
1255 Amsterdam Ave., New York, NY 10027
202-853-2475
energypolicy.columbia.edu
University research center on energy and climate change.

Global Carbon Project
CSIRO Oceans and Atmosphere, GPO Box 1700, Canberra, ACT 2601, Australia
+61-2-6246 5631
globalcarbonproject.org/index.htm
International group of scientists researching greenhouse gases and the human effects on the climate.

International Energy Agency
9 rue de la Fédération, Paris, Cedex 15, France, 75739
+33 (0)1 40 57 65 00
iea.org
Global organization tracking energy data and government energy policies; also advises governments on energy efficiency.

International Group of Liquefied Natural Gas Importers
8 rue de l'Hôtel de Ville, Neuilly-sur-Seine, France, 92200
+ 33 1 56 65 51 60
giignl.org
Nonprofit organization promoting development of the LNG sector.

U.S. Energy Information Administration
1000 Independence Ave., S.W., Washington, DC 20585
202-586-8800
eia.gov
Federal agency that collects and analyzes energy data and information to support policymaking and public information.

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Footnotes

[1] Samantha Maldonado, “How South Jersey Became Ground Zero in Feds' Push for New Way to Transport LNG,” Politico, March 16, 2020, https://tinyurl.com/ydfuq2gz; “Delaware River commission approves Gibbstown, New Jersey, LNG terminal,” Reuters, Dec. 9, 2020, https://tinyurl.com/y9v78vgz.

[2] Joanna Marsh, “Environmental Groups Appeal Permits For LNG Export Facility in New Jersey,” FreightWaves, Oct. 15, 2020, https://tinyurl.com/y72bcyf8; Tom DiChristopher, “US to become a net energy exporter in 2020 for first time in nearly 70 years, Energy Dept says,” CNBC, Jan. 24, 2019, https://tinyurl.com/ya6l2cjr; and “LNG at the crossroads: Identifying key drivers and questions for an industry in flux,” Deloitte Center for Energy Solutions, https://tinyurl.com/y9uddmyx.

[3] “Liquefied Natural Gas,” Office of Fossil Energy, U.S. Department of Energy, https://tinyurl.com/ych48j9j.

[4] “World Energy Outlook 2019,” International Energy Agency, November 2019, https://tinyurl.com/y8qt55kr; “The Biden Plan for a Clean Energy Revolution and Environmental Justice,” Biden-Harris Campaign, https://tinyurl.com/y3agqq6p; and Ben Lefebvre, “How Biden may save U.S. gas exports to Europe,” Politico, Nov. 27, 2020, https://tinyurl.com/yylq757l.

[5] Giorgio Bresciani et al., “The future of liquefied natural gas: Opportunities for growth,” McKinsey & Company, Sept. 21, 2020, https://tinyurl.com/ybvp4v8a.

[6] “Global Gas and LNG Outlook to 2035,” McKinsey & Company, Sept. 4, 2019, https://tinyurl.com/y5vqogq5.

[7] Anjli Raval, “Majors Back Gas in Power Switch as a ‘Bridge Fuel,’” Financial Times, Nov. 28, 2018, https://tinyurl.com/y79glu23; “World Energy Outlook, 2018,” International Energy Agency, November 2018, https://tinyurl.com/y9tkezeg; and “Environmental Impacts of Natural Gas,” Union of Concerned Scientists, June 19, 2014, https://tinyurl.com/y8ydvk69.

[8] Hannah Ritchie and Max Roser, “Fossil Fuels,” Our World in Data, https://tinyurl.com/yavf9upv.

[9] “LNG Market Trends and Their Implications,” International Energy Agency, June 2019, https://tinyurl.com/y7zpyal6.

[10] Drew Desilver, “Renewable Energy is Growing Fast in the U.S., but Fossil Fuels Still Dominate,” Pew Research Center, Jan. 15, 2020, https://tinyurl.com/y3qfonky.

[11] “LNG at the crossroads,” Deloitte Center for Energy Solutions, https://tinyurl.com/y9uddmyx.

[12] Bresciani et al., op. cit.

[13] “Liquefied Natural Gas Market Size, Share and Trends Analysis,” Grand View Research, July 2020, https://tinyurl.com/y9kta4xg.

[14] Sean O'Brien and Antonio Erias Rodriguez, “Record year for gas liquefaction investment lights a path towards market flexibility,” International Energy Agency, Feb. 19, 2020, https://tinyurl.com/s9ulh9s.

[15] Bresciani et al., op. cit.

[16] “Digital LNG Trading,” “Redefining Energy,” July 2020, episode 30, https://tinyurl.com/ybdt9f47.

[17] Sam Meredith, “Russian energy minister ridicules Rick Perry's idea of US ‘freedom gas,’” CNBC, Oct. 2, 2019, https://tinyurl.com/y4ggce43.

[18] Umair Irfan, “The best case for and against a fracking ban,” Vox, Oct. 7, 2020, https://tinyurl.com/yapeyofv.

[19] “Oil & Gas/ Hydraulic fracturing market,” Fortune Business Insights, September 2020, https://tinyurl.com/yd42azhw; “What if hydraulic fracturing was banned?” Global Energy Institute, 2020, p. 6, https://tinyurl.com/tdm7y77.

[20] Irfan, op. cit.

[21] Lisa Friedman, “Trump's ‘Frack’ Attack on Biden Seems to Be Falling Short,” The New York Times, Oct. 13, 2020, https://tinyurl.com/y3jkv49z; Lefebvre, op. cit.

[22] “Energy and the environment explained,” U.S. Energy Information Administration, https://tinyurl.com/y39wlws8.

[23] Naureen Malik et al., “Peak Gas Is Coming to the U.S. Sooner Than Anyone Expected,” Bloomberg, Oct. 22, 2020, https://tinyurl.com/y4vculrr.

[24] Jonathan Stern and Adi Imsirovic, “A Comparative History of Oil and Gas Markets and Prices: Is 2020 just an extreme cyclical event or an acceleration of the energy transition?” Oxford Institute for Energy Studies, April 2020, pp. 1, 7, https://tinyurl.com/yxdtyqns.

[25] “Liquefied Natural Gas (LNG),” Royal Dutch Shell, https://tinyurl.com/yyogbbhy.

[26] James T. Jensen, “The Development of a Global LNG Market,” Oxford Institute for Energy Studies, 2004, p. 2, https://tinyurl.com/yanrhcdz.

[27] Philip R. Weems and Nina M. Howell, “Japan's pivotal role in the global LNG industry's 50-year history,” King & Spalding LLP, https://tinyurl.com/y8xbb96b.

[28] “LNG Trade: Past, Present, Future (?),” U.S. Department of Energy, 1995, p. ii, https://tinyurl.com/yb94e288.

[29] Jensen, op. cit., p. 8.

[30] Ibid.

[31] Ibid., pp. 8, 11, 12; “Global LNG Fundamentals,” U.S. Department of Energy, 2017, p. 9, https://tinyurl.com/ycqgny37.

[32] Simon Romero, “Demand for Natural Gas Brings Big Import Plans, and Objections,” The New York Times, June 15, 2005, https://tinyurl.com/y8km775j.

[33] “Can the United States sustainably export LNG at competitive prices?” Deloitte Center for Energy Solutions, 2016, p. 1, https://tinyurl.com/y95fah9n.

[34] “More U.S. coal-fired power plants are decommissioning as retirements continue,” U.S. Energy Information Administration, July 26, 2019, https://tinyurl.com/y3mprktr; Nicholas Kusnetz, “U.S. Emissions Dropped in 2019: Here's Why in 6 Charts,” Inside Climate News, Jan. 7, 2020, https://tinyurl.com/teqr8eo.

[35] “U.S. liquefied natural gas exports have declined by more than half so far in 2020,” Energy Information Agency, June 23, 2020, https://tinyurl.com/ybngz875; Bresciani et al., op. cit.; and Tatiana Mitrova and Tim Boersma, “The Impact of US LNG on Russian Natural Gas Export Policy,” Columbia Center on Global Energy Policy, December 2018, pp. 7, 32-33, https://tinyurl.com/y8pr94ny.

[36] Bresciani et al., ibid.

[37] “IEA nudges up 2020 gas demand forecast, but still sees record fall,” Reuters, Oct. 12, 2020, https://tinyurl.com/y66sspbg.

[38] Aaron Sheldrick, “China could top Japan's LNG imports in 2020 as coronavirus cuts demand,” Reuters, June 18, 2020, https://tinyurl.com/ybd98ct6.

[39] “China Inks First Term Deal for US LNG Since Trade War Erupted,” Bloomberg News, Nov. 7, 2020, https://tinyurl.com/y3e78twr.

[40] Brett Forrest, “U.S., Russia Race to Outflank Each Other on Russian Pipeline,” The Wall Street Journal, Nov. 29, 2020, https://tinyurl.com/y43pap5g; “U.S. Sanctions on Russia: An Overview,” Congressional Research Service, March 23, 2020, https://tinyurl.com/y389htrb.

[41] Alejandra Borunda, “Natural gas is a much ‘dirtier’ energy source than we thought,” National Geographic, Feb. 19, 2020, https://tinyurl.com/y2p2o27q.

[42] Malik et al., op. cit.

[43] Ibid.

[44] Ivan Penn, “Atlantic Coast Pipeline Canceled as Delays and Costs Mount,” The New York Times, July 5, 2020, https://tinyurl.com/y926obnl.

[45] “Delaware River commission approves Gibbstown, New Jersey, LNG terminal,” op. cit.

[46] Mirza Duran, “Siemens, Total to work on ‘green’ LNG production,” Offshore Energy, June 12, 2020, https://tinyurl.com/yapxweu9; “LNG carbon offsetting: fleeting trend or sustainable practice?” International Group of Liquefied Natural Gas Importers, June 18, 2020, pp. 4, 5, https://tinyurl.com/ydapmxe4.

[47] “Gas 2020,” International Energy Agency, June 2020, https://tinyurl.com/y7k3t6nx; Vanessa Dezem, Rachel Morison and Anna Shiryaevskaya, “Wintry Weather Arriving in Europe Boosts Power and Gas Prices,” Bloomberg, Dec. 1, 2020, https://tinyurl.com/y96to6nn.

[48] “Gas 2020,” ibid.; Bresciani et al., op. cit.

[49] Karl Matthiesen, “Transition 2020: Moniz defends natural gas as climate transition fuel,” Politico Pro, Dec. 3, 2020, https://tinyurl.com/y894mlqu.

[50] Bresciani et al., op. cit.

[51] Molly Burgess, “Hyundai unveils world's first LNG-powered container ship,” Gas World, Aug. 24, 2020, https://tinyurl.com/yat5qpz7.

[52] Simon Flowers, “Decarbonisation and Peak Gas Demand,” Wood Mackenzie, July 31, 2020, https://tinyurl.com/yatmbyc3.

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About the Author

Sara Toth Stub is a Jerusalem-based U.S. journalist who has written for The Wall Street Journal, The Atlantic, U.S. News & World Report and other publications. She covers business, culture and travel.

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