Supply bottlenecks and growing demand are shoring up investment in the industry
Shoring up supplies: Qatar is boosting its natural gas extraction and LNG production. Image: Getty Images
Investment into the development of natural gas resources jumped in the first half of the year, as the Ukraine War forces Western countries to look for alternatives to Russian gas.
Some nine foreign direct investment (FDI) projects were announced in natural gas extraction activities in the first six months of 2022, totalling around $25bn, according to the figures from greenfield investment tracker fDi Markets.https://flo.uri.sh/visualisation/11160798/embed
Some nine foreign direct investment (FDI) projects were announced in natural gas extraction activities in the first six months of 2022, totalling around $25bn, according to the figures from greenfield investment tracker fDi Markets.
The volume of natural gas investment in the first half of this year was bigger than the full-year data in 2021, when investors announced two natural gas extraction projects worth $5.05bn.
“The new liquified natural gas projects are driven mainly by a short-term increase in natural gas demand in Europe and Asia, due to Russia’s war in Ukraine and ensuing sanctions, and restrictions placed on Russian gas exports,” Rystad Energy said in its August 24 press release.
The overwhelming majority of announced FDI projects into natural gas extraction in the first half of the year were in Qatar. QatarEnergy, the country’s state-owned company, signed five partnerships with major international oil companies to carry out the $28.75bn North Field East (NFE) project, which aims to ramp up the country’s extraction and liquefaction capacity. The international partners include France’s TotalEnergies, Italy’s Eni, the US’s ConocoPhillips and ExxonMobil, and the UK’s Shell.
Qatar holds the third-largest natural gas reserves globally, after Russia and Iran, according to OECD figures.
Beyond the NFE project in Qatar, Western investors announced gas projects in the likes of Israel, Norway, Australia and New Zealand, strengthening an emerging trend that sees investors from developed countries leaning more towards doing business with like-to-like partners in other developed countries to mitigate geopolitical risks.
“Fundamentals are strong for continued natural gas investment,” Ian Thom, director of Middle East upstream of energy consultancy Wood Mackenzie, tells fDi. He adds that increasing investments into natural gas will continue, and that more oil and gas companies are seeking to “increase the share of gas in their output” over the medium and long term, as gas is “more resilient than oil in a rapidly decarbonising scenario”.