PITTSBURGH (TNS) — When two of Pittsburgh’s largest gas drillers talked about the role of natural gas in the global market on Thursday, their message didn’t stray much from statements made soon after Russia invaded Ukraine early this year and turned a simmering global energy imbalance into a full-blown crisis.
Appalachian shale gas is the obvious answer to energy poverty and decarbonization goals, the leaders of EQT Corp. and CNX Corp. believe. Both have advocated for the expansion of LNG exports, or liquefied natural gas, to serve markets orphaned by Russia.
EQT’s CEO Toby Rice said, “The world is increasingly recognizing the role natural gas will play, in providing affordable, reliable, low carbon energy for decades to come.”
The International Energy Agency, which released its annual World Energy Outlook report on Thursday, painted a dimmer picture for gas — concluding that Russia’s invasion of Ukraine has made the world rethink its reliance on not just Russian gas but natural gas in general.
”The era of rapid global growth in natural gas demand is drawing to a close,” the IEA said.
In three scenarios, it modeled, ranging from what amounts to an “as things stand now” scenario to a net zero carbon scenario, natural gas demand peaks in the next few years. In the case of the world actually achieving net zero emissions by 2050 — as some of the largest economies have said they would do — there is 20% less demand for natural gas in 2030 than in 2021. By 2050, it’s down by 75%.
”The depth and intensity of today’s crisis have led to concerns about the future cost and availability of natural gas which have damaged confidence in its reliability and put a major dent in the idea of it serving as a transition fuel,” the IEA wrote.
”This highlights a key dilemma for investors considering large, capital-intensive LNG projects: how to reconcile strong near-term demand growth with uncertain but possibly declining longer term demand,” the report said.
Nick DeIuliis, CEO of Cecil-based CNX Corp., in remarks to analysts said the world has only grown more uncertain in recent months, with inflation, high interest rates, and volatile natural gas markets.
While it may have seemed for a short time that permitting reform pushed by West Virginia Sen. Joe Manchin to propel the construction of new gas pipelines and other energy infrastructure was likely to pass, that effort fell apart.
”Hard to believe,” DeIuliis said with sarcasm. He sought to reassure shareholders that CNX’s economics still work even without new pipelines to carry Appalachian gas out of the area.
Rice highlighted EQT’s increasing role in crafting an energy agenda in the region and the country. Over the past quarter, the company launched an effort to convince regulators and politicians to push through natural gas pipelines and liquefied natural gas terminals in the U.S. It also announced it was part of a new coalition with other companies and the state of West Virginia that aims to develop a hydrogen hub in the area.
While the vision is lofty, EQT’s investment in these kinds of initiatives will be modest for the next several years, Rice said, until the company can figure out profitability of projects like hydrogen production from natural gas that involves either capturing the resulting CO2 emissions and storing them underground or turning them into a solid.
On a state level, support for hydrogen and natural gas got another boost this week as Pennsylvania’s legislature passed a bill that allocates $50 million a year in credits for a hydrogen hub and increases a previously established tax credit for petrochemicals and fertilizer made from natural gas by $30 million a year.
One problem with hydrogen, Rice said, is that while it can be made cheaply, transporting it adds a prohibitive cost. Not to mention the lack of customers for a fuel that hasn’t yet reached primetime in the applications where it can make a dent in emissions.
That’s where building out a large pipeline network to export LNG can “underwrite” the infrastructure needed for hydrogen, he said. He suggested new gas pipelines be constructed “hydrogen ready” for later repurposing.
Rice has called his signature initiative, Unleashing U.S. LNG, the “largest green initiative on the planet,” envisioning Appalachian natural gas, which on the whole is produced with fewer greenhouse gas emissions than shale gas in other regions, being shipped abroad to displace foreign coal.
The IEA warned that the volatility in the cost of natural gas has put that trajectory further out of reach.
”High gas prices have dampened prospects for coal-to-gas switching, but they have not extinguished them,” the agency wrote.
Asia will remain a strong market for U.S. natural gas in the longer-term, the report says.
EQT posted profits of $684 million, or $1.69 per share, during the three months ended Sept. 30, up from a loss of nearly $2 billion, or $5.54 per share, a year ago.
CNX recorded a loss of $427 million, or $2.28 per share, for the third quarter. At this time last year, it had a net loss of $873 million, or $4.05 per share.
Both companies recorded large losses in the value of their derivatives, which are meant to hedge against the volatility of natural gas prices.
