Natural gas is being touted as a key energy source in the future, with numerous oil companies announcing projects in the field. While natural gas projects have traditionally yielded lower returns in comparison to oil projects, oil companies have slim choices when it comes to strategizing for the future.

The average weighed internal rate of return for liquefied natural gas projects that are presently in the pipeline is approximately 13%, compared to 20% and 51% for deep water projects and unconventional oil developments, respectively. However, oil companies have discovered fewer new oil sources than natural gas opportunities within the past 10 years, and along with governments around the globe focusing on pollution reduction and clean energy, the demand for natural gas is on the rise.

Oil consumption is forecast to grow 0.5% each year until 2040, which is a significantly slow down compared to previous decades, while other forecasts indicate oil demand could come reverse within the next 10 years. Consumption for natural gas, however, is predicted to grow to represent 24% of global energy by 2040, rising two percentage points from 2016, according to the International Energy Agency. By 2025, companies such as Shell and BP are forecast produce more gas than oil.

Source: The Wall Street Journal