J.P. Morgan: Gas and LNG Price Pressure to Drive Shift from Coal

J.P. Morgan predicts lower gas and LNG prices due to supply growth, which could accelerate the coal-to-gas transition and reduce emissions, though challenges remain for oil firms and the US grid.

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Ebenezer Mensah
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J.P. Morgan: Gas and LNG Price Pressure to Drive Shift from Coal

J.P. Morgan: Gas and LNG Price Pressure to Drive Shift from Coal

J.P. Morgan predicts that global natural gas and liquefied natural gas (LNG) prices will face downward pressure through the end of the decade due to rapid growth in supply and shipping infrastructure, particularly in Qatar and the United States. The investment bank forecasts a 2% annual growth in natural gas production by 2030 to 4,600 billion cubic meters (bcm) from 4,000 bcm in 2022, leading to an oversupply of 63 bcm by the end of the decade.

LNG exporting infrastructure is also expected to expand significantly, growing by 156 bcm by 2030 from nearly 600 bcm in 2024. This growth in gas and LNG supply, coupled with the resulting drop in prices, could facilitate a rapid conversion from coal to gas. J.P. Morgan estimates that this shift could potentially save up to around 17% of global carbon emissions.

Why this matters: The transition from coal to cleaner energy sources like natural gas is essential for reducing global greenhouse gas emissions and mitigating the impacts of climate change. J.P. Morgan's analysis suggests that market forces, driven by increased gas and LNG supply, could accelerate this transition and contribute to significant emissions reductions.

Despite the potential environmental benefits, the report notes that the European oil companies' plans to grow gas and LNG output will have a minimal impact on their targets to reduce the carbon emission intensity of their business by 2030. The outlook for added feed gas demand in the coming months is beginning to firm, portending a possible tight supply balance next year. However, the European Union's LNG demand is likely to peak this year as efforts to reduce reliance on fossil fuels accelerate.

The report also highlights that U.S. power and technology companies are concerned that the country's electrical systems are not expanding fast enough to meet the rapidly growing power needs of technologies like Generative AI. This has led some companies to bypass utilities and strike deals directly with power producers or build their own supply.

J.P. Morgan's analysis suggests that the pressure on gas and LNG prices, driven by rapid growth in supply and infrastructure, could play a significant role in facilitating the transition from coal to cleaner energy sources. While the environmental benefits are clear, the report also acknowledges the challenges faced by European oil companies in reducing their carbon footprint and the concerns over the U.S. electrical grid's ability to keep pace with the growing power demands of emerging technologies.

Key Takeaways

  • JP Morgan forecasts 2% annual growth in global natural gas production by 2030.
  • LNG exporting infrastructure to expand by 156 bcm by 2030, leading to oversupply.
  • Shift from coal to gas could save up to 17% of global carbon emissions.
  • European oil firms' gas/LNG plans have minimal impact on 2030 carbon reduction targets.
  • US power grid concerns as tech companies bypass utilities for direct power deals.