Save for later Print Download Share LinkedIn Twitter LNG fleet owner Golar LNG struck a confident note on the role of natural gas in the energy transition in second quarter results Monday, stating that a number of drivers were helping speed up upstream projects and growth in its floating LNG business (LNGI May21'21). “The increasing focus on ESG [environmental, social and governance], where gas is seen as a cleaner energy source, together with current and forward commodity prices are however helping speed up upstream developments,” the firm said in a results presentation today. Golar is eyeing growth from its floating LNG technology, believing that momentum will be “underpinned by higher LNG prices ... fundamentally supported by LNG’s role as a transition fuel, with its substantial environmental benefits in reducing CO2, sulfur oxide and nitrogen oxide emissions versus coal and oil.” Uncertain Gas Outlook Nevertheless, the outlook for gas as a transition fuel is mixed. The Paris-based International Energy Agency (IEA) has called for stringent policies to accelerate the switch to cleaner fuels. The IEA sees strong global gas demand for the next four years, expecting consumption to rise 3.6% year on year in 2021 to around 4 trillion cubic meters (380 billion cubic feet per day) bouncing back from the demand destruction wrought by the Covid-19 pandemic. But in its Net-Zero by 2050 report the agency sees globally traded LNG volumes slumping from 2020’s 420 billion cubic meters to just 160 Bcm in 2050. And in Europe, the European Commission has proposed a landmark legislative package that could have a material impact on gas demand, aimed at cutting the 27-member bloc's emissions by at least 55% by 2030. An update on the envisaged extent of gas' "transitional" role in Europe won't be revealed until later this year, but there are clear signs that gas faces multiple fights on multiple fronts, with policymakers already talking of a "marginal" role in coming years (WGI Jun.23'21). Golar Eyes Floating Liquefaction Growth However, in the near term Golar remains optimistic on the LNG market. Offshore Kribi, Cameroon in sub-Saharan Africa, the firm concluded a deal last month with Perenco to use more of its FLNG vessel Hilli Episeyo’s 2.4 million tons of liquefaction capacity. Assuming Perenco exercises its option for an incremental 0.4 million tons per year from 2023-26 – the increase in capacity will net Golar some “$113 million on [Dutch gas benchmark] TTF forward curves, or $373 million if the Aug. 6, 2021 spot TTF price is assumed to prevail over the same timeframe.” Golar says it plans to use its floating liquefaction (FLNG) technology to increase its presence “upstream in the LNG value chain. We have expanded our upstream team and are currently exploring several fields already producing associated gas, as well as stranded gas opportunities,” the firm said. Finally, the firm also highlighted “specific commercial and technical discussions [taking place] with an existing client for use of a 5 million ton Golar Mark III new [LNG tank] building design." Tom Pepper, London
