Energy transition risk for Australia’s LNG: how to build up resilience for a low-carbon future

Abstract

Global gas demand is expected to surge 12.5% in the next 8 years, from about 4 trillion cubic meters (Tcm) this year to around 4.5 Tcm in 2030. Demand in the Asia Pacific region is expected to soar about 30% by 2030. Many countries, particularly in the European Union (EU), will look to diversify away from Russian gas supplies in the wake of Russia’s invasion of Ukraine. Liquified natural gas (LNG) is set to play a major role in plugging some of this supply gap – compared to 2021 levels, Europe’s LNG demand increased 60% to 123 million tonnes in 2022. There is no doubt that LNG suppliers with the lowest costs and emissions will stay in demand for longer, as buyers everywhere are not only looking for the cheapest volumes but also for supply with the lowest carbon footprint. In this paper, Rystad Energy benchmarks the carbon intensity of LNG exports from Australia to major Asian markets against other exporters to see how carbon-competitive Australia’s LNG is across the entire value chain: from upstream to regasification. We also take a closer look at specific LNG projects and estimate how much of the value might be at risk due to lower commodity prices and CO₂ cost adoption. This type of analysis breaks down the complexity of energy transition risk for the Australian LNG market, allowing companies to implement risk mitigation plans at the earlier stages of the market’s evolution towards a low-carbon future.