McKinsey & Company: Survey reveals 91% of gas buyers are yet to begin implementing decarbonisation strategies
Published by Jessica Casey,
Editor
LNG Industry,
A survey of 73 European gas buyers by McKinsey & Company reveals that Europe’s energy crisis may be stalling decarbonisation efforts with 91% of gas buyers yet to begin implementing decarbonisation strategies. The Energy Insights European Gas Buyers Survey found 90% of gas buyers aim for half their energy portfolio to reach net zero by 2040. Yet some are reverting to coal and 42% have not even finalised or begun executing their net zero plans, indicating the energy security crisis may have forced a pause in decarbonisation.
Green hydrogen and biogas emerge as the most popular potential alternative to natural gas for 62% and 60% of buyers, respectively. With major suppliers recently involved in merger and acquisition (M&A) activity to expand their positions in biogas and biomethane, this creates an opening for gas and LNG suppliers to partner with buyers in achieving decarbonisation targets. 27% also see certified lower-carbon natural gas as a viable alternative, revealing latent demand for suppliers to bring back carbon-neutral LNG cargos using offsets.
Over three-quarters of buyers are in favour of using partnerships with integrated-energy suppliers to support the energy transition, which could open the way to suppliers partnering with buyers to understand and implement decarbonisation plans. With demand for new energy set to outstrip supply and few market mechanisms in the space, buyers’ access to new energy will be increasingly reliant on relationships with suppliers.
The report notes that insecure supplies and increased prices are significantly reducing gas consumption. Over 75% of gas buyers are expecting to reduce their gas usage over the next few years and 40% plan to reduce consumption by over 10% within five years. Demand reduction will be driven largely by increased energy efficiency, followed by fuel switching.
The energy crisis has reduced service levels and flexibility over payment terms and contracts. 38% have seen reduced contract flexibility and 24% experienced more stringent payment terms and reduced levels of service.
Nicholas Browne, Global Gas and Hydrogen Solution Leader at McKinsey, said: “With gas buyers adopting ambitious net zero targets but lagging on implementation, there is a clear opportunity for gas suppliers to partner with buyers on navigating the energy transition. Oil and gas super majors have been active in the M&A space to expand their roles in biogas which is among the most popular alternatives to natural gas. Suppliers could help buyers overcome decarbonisation bottlenecks by develop-ing physical infrastructure and pressing for consistent policy support.”
Read the article online at: https://www.lngindustry.com/special-reports/07072023/mckinsey-company-survey-reveals-91-of-gas-buyers-are-yet-to-begin-implementing-decarbonisation-strategies/
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