A report from climate campaign group Global Witness reveals that the fossil fuel sector is anticipated to allocate more than $1 trillion worldwide over the next decade for the expansion of natural gas production.

Instead of weaning itself off fossil fuels, Europe will play a pivotal role in driving the surge in investment as it rushes to replace the missing Russian gas thanks to sanctions and the destruction of the Nord Stream 1 & 2 pipelines last year.

Approximately $223bn will be invested in expanding European fossil fuel production and developing new gas extraction sites to meet the continent's growing demand for energy.

The report highlights that Shell, TotalEnergies, ExxonMobil, Equinor and Eni are expected to be among the top investors, contributing a combined $144bn to gas supply projects for Europe. Annual expenditure by the top 20 companies producing for Europe is set to increase by three-quarters, from $60bn in 2024 to $105bn in 2033.

“Burning the fossil gas alone from forecast production for Europe – 3,486bn cubic metres – would emit 6.6bn tonnes of carbon dioxide between now and 2033 – equivalent to 23 years’ worth of France’s carbon emissions,” Global Witness said. “The 6.6bn emissions figure is for carbon dioxide only, and would be significantly higher if it included methane emissions.”

Global Witness urged a reconsideration of Europe's reliance on fossil gas and a more accelerated transition toward sustainable energy alternatives.

The International Energy Agency (IEA) estimates that the EU will account for 66% of the overall gas volumes consumed in the wider European region in 2024, with its share staying virtually the same in 2030 at 65%.

Soft market in the short term

Despite the anticipated long-term growth in demand for oil and gas, in the short term oversupply has weakened demand. Nevertheless, both the oil and gas market are set to be more comfortable than originally anticipated this year. Strong non-OPEC+ supply growth has shrunk the size of the oil deficit in 2024, while for natural gas, European storage is set to finish the season well above average, suggesting limited upside for prices, according to ING.

Dominic Eagleton, senior fossil fuels campaigner at Global Witness, said: “The numbers are stark – Europe is hurtling down a dangerous path by doubling down on fossil gas, and needs to pull out all the stops to end the age of fossil fuels. The European Commission must seize its chance to quicken Europe’s exit from gas and set 2035 as a target date to phase out this costly, crisis-ridden and climate-boiling fossil fuel.”

The US is also contributing to the problem after it became the biggest oil and gas producer and exporter in the world in 2023, despite its nominal commitment to reduce the use of fossil fuels.

The bullish outlook for the oil market has softened in recent months, given stronger-than-expected supply growth from non-OPEC producers in 2023, predominantly driven by the US. However, growth was also seen from Brazil, Guyana and Norway. Stronger non-OPEC supply has meant that OPEC+ has had to take further action to try to keep the market balanced and is likely to extend its production cuts for the rest of this year.

“Additional voluntary supply cuts announced by a handful of OPEC+ members at the end of 2023 amounted to 2.2m barrels per day. However, 1.3m bpd was the rollover of existing cuts from Saudi Arabia and Russia, which means that the market sees around 900,000 bpd of fresh cuts for the first quarter of this year,” ING said in a note.

This action from OPEC+ has ensured that the surplus that was expected in the second quarter has been erased. However, ING’s analysis shows that the market will return to a fairly large surplus in the second quarter if OPEC+ do not roll over these cuts into the second quarter.