More than $280bn (£180bn) of liquefied natural gas (LNG) projects being planned over the next decade risk becoming “stranded” if global action is taken to limit climate change to 2C, according to a report by the thinktank Carbon Tracker.

LNG projects allow gas to be compressed into tankers and sold around the world, making it key to hopes in the US, Canada and Australia of fully exploiting their gas reserves.

But the new analysis shows that if emissions are cut to keep global temperature rise below the internationally agreed target many LNG projects being considered will not be needed.

The report concludes that over the next 10 years $82bn of LNG plants in Canada would be surplus to requirements, $71bn in the US and $68bn in Australia, with the rest of the world, led by Russia and Indonesia, accounting for the remaining $59bn.

The analysis found Shell’s agreed takeover of BG makes it by far the biggest player in the market and $85bn of the combined company’s potential LNG projects would not be needed.

Shell said it was only the biggest in LNG compared to oil majors, and no comparison had been with national oil companies.

The report is the latest to raise concerns that increasing action to cut carbon emissions, combined with falling renewable energy prices, will put some fossil fuel investments at risk. Carbon Tracker has pioneered this analysis, which has been backed by the Bank of England and the World Bank.

“Investors should scrutinise the true potential for growth of LNG businesses over the next decade,” said James Leaton, Carbon Tracker’s head of research. “The current oversupply of LNG means there is already a pipeline of projects waiting to come on stream. It is not clear whether these will be needed and generate value for shareholders.”

The Carbon Tracker report examined the LNG, North American and European gas markets in the light of scenarios produced by the International Energy Agency in which carbon emissions are cut to limit global warming. It ranked the future gas projects being considered by cost and found that those producing gas at over $10/mmBtu risked being stranded by an international crackdown on emissions.

Previous Carbon Tracker reports have shown that coal and oil use must decline in future decades to tackle climate change, potentially leaving $1tn of oil projects unable to make a return.

But gas, which produces fewer emissions when burned, could continue to grow to 2040, the new report finds. However, not all the planned projects could go ahead. The analysis finds that 16 of the world’s 20 biggest LNG companies are considering future major projects that are unlikely to be needed to meet gas demand to 2025 if climate change is tackled.

“The golden age of gas once mooted by energy commentators has not arrived in most regions,” the report states. “With the costs of renewables falling, gas is already struggling to compete in some markets, or could be priced out soon in others. The shale gas revolution in the US has been the exception, but this has not been replicated in Europe where the swing has been from coal to renewables.”



A spokeswoman for Shell said: “At Shell, we believe that overall energy demand could double by 2050 driven by population growth and rising prosperity. The energy system is in long term transition as society looks to a lower carbon future, but people’s desire for a decent quality of life and less CO2 require both renewables and cleaner hydrocarbons such as natural gas and LNG to provide a full suite of energy products, from power to plastics.”

Natural gas – methane – is a potent greenhouse gas and the fuel is only cleaner than coal if leaks of methane are kept low. Stopping these “fugitive emissions” should therefore be a priority for the industry, says the report. It adds: “At the gas prices in our scenarios, capturing this lost product should more than pay for itself, so there is little excuse for not dealing with the problem.”

The report does not expect fracking to be significant source of gas in the UK in the next decade. “The economics shows UK unconventional supply will struggle to compete in the gas market over the next decade, and shale gas could only contribute a tiny volume if projects do go ahead,” concluded Andrew Grant, lead analyst at Carbon Tracker.