Balancing energy transition with security [LNG2023]
Summarise PETRONAS position regarding the energy trilemma of security, affordability and sustainability?
A year has passed, and we have gone through multiple events that has shaken the energy market, making it more volatile with energy security a pressing concern for many nations.
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It is important to note that the energy trilemma is unique to different nations and economies. Some nations are able to focus on sustainability, while others are challenged with energy security and affordability.
This is why, at PETRONAS, we take the view that the energy transition must be undertaken in a just and equitable manner. To this extent, the focus of the transition must be balanced with greater emphasis being put behind stabilising supply to meet the rising demand for energy.
In terms of providing energy accessibility and security, natural gas is an abundant source. It will still be relevant in the coming decades, as more and more modern, scalable and economical technologies are being adopted to monetise gas in a safer, cleaner and more responsible way.
PETRONAS being an established LNG player with more than 40 years of experience, takes a realistic path to a low-carbon future and will continue to advocate gas and LNG usage to complement renewables.
Global natural gas prices have subsidised significantly in the last six months. Can we consider the immediate threat of gas shortages in Asia and Europe over?
Although global natural gas prices have indeed subsided significantly, it does not necessarily mean that the immediate threat of gas shortages is completely over.
What we are facing today is not merely caused by the Russian-Ukraine conflict, but a compounding effect of the less-than-modest investments in upstream over the last few years when LNG demand is growing, amid a shift in focus to renewables.
To ensure the sustainability of the gas industry, producers, consumers and governments have an equal responsibility to create a harmonious LNG ecosystem. As long as conditions remain the same, the threat of energy shortage will not be over.
We need stronger collaboration between all parties across the value chain and stable investments in new gas fields and infrastructures in making LNG/gas more accessible, to ensure supply demand is balanced.
At PETRONAS, we believe in a balanced approach which combines responsible development of conventional and unconventional resources with renewable energy to ensure global energy security and to support the movement towards a net zero carbon emissions future.
What is PETRONAS main message to investors, policymakers, and the energy industry in terms of avoiding future energy crises?
We need to remember that there is no perfect set of rules in the energy transition. Any transition requires continuous learning and refinements, whereby the key action here is to start doing something.
Thus, it is essential for all parties across the value chain to collaborate and take collective action to create a sustainable and harmonious ecosystem and prevent future energy crises from occurring by learning from valuable lessons of the past.
There are 2 key areas that all parties should focus on:
-Stronger collaboration and table investment in new gas fields in making LNG and gas more accessible. These include infrastructure readiness, technical and financial support. As new facilities development requires huge investments, it’s imperative for producer and consumer to collaborate to create mutual benefit.
-Pivotal role of financing bodies. The rise of ESG (environmental, social, governance) financing as announced by major banks in the region is a great milestone as it shows their appreciation and support for cleaner energy projects including LNG.
We, at PETRONAS, are firm believers in taking accountability and playing our part to ensure a just transition that allows progress and sustainable development for all. We must move forward, taking practical steps towards a low-carbon future together.
To what extent has a tightened LNG market impacted global emissions?
The cost of a tightened LNG market has forced the hand of governments and nations to turn to higher emissions energy sources such as coal.
As an LNG producer, PETRONAS is fully supportive of all endeavours to improve liquidity and stability in the market.
We hope that after a few years of operating in a volatile environment, industry players will begin to realise the importance of security and stability of LNG supply.
We believe that long-term contracts and a stable long-term pricing mechanism will not only be able to address the pricing volatility faced by the industry but also establish long-term and sustainable gas demand from buyers. This is also critical for producers who are developing LNG exporting projects which require huge investments and a long gestation period.
We believe that under any market conditions, the approach to LNG supply remains to be anchored on close collaboration with both sellers and buyers to ensure business sustainability and reliability which is mutually beneficial for all parties involved.
At PETRONAS, we recognise that the LNG market is dynamic and is influenced by various geopolitical, economic and environmental factors. However, we remain firm believers of LNG, as the cleanest burning fossil fuel to be the ideal transitional energy source that will ensure global sustainable development.
Walk through how PETRONAS is contributing to increased global LNG supply with its new project pipeline? What is the current status of LNG Canada Phase 2 and Petronas’ third FLNG project in Malaysia?
One of our upcoming projects that is expected to come onstream by the middle of this decade is LNG Canada. At full capacity, LNG Canada will expand our portfolio by 14mn metric tons/year.
PETRONAS and our joint venture partners are currently evaluating options for phase 2 of LNG Canada.
As for PETRONAS’ third FLNG project, a final investment decision (FID) was taken in November 2022, for a nearshore LNG facility in Sabah.
The engineering procurement, construction and commissioning (EPCC) contract for the project was awarded to the winner of front-end engineering design (FEED) competition (JGC Corporation and Samsung Heavy Industries).
The nearshore LNG facility, located at Sipitang Oil and Gas Industrial Park (SOGIP), Sabah, is planned for completion by 2027. This project will grow our production portfolio by another 2mn mt/yr of LNG. Beyond these two projects, PETRONAS is also partnering with YPF to explore an integrated LNG value chain in Argentina.
Should LNG be considered a transitory or end fuel on the road to net zero?
At PETRONAS, we take a realistic and middle-ground view of the energy transition, as renewables alone cannot be the answer toward meeting global energy demand.
The challenge of intermittency in renewable energy supply continues to persist which in turn impacts the energy reliability and security that industries and businesses require.
This is where natural gas plays a crucial role and forms the core ingredient of the energy transition.
As the cleanest burning fossil fuel, natural gas is the perfect complementary partner to address intermittency issues faced with renewables. For example, how natural gas can partner solar to provide an uninterrupted supply of energy 24 hours a day, even when the sun is not shining. Natural gas as fuel is already a mature technology and advanced with multiple adoption technologies capable of meeting stricter carbon reduction regulations.
On the flip side, the use of renewables to power LNG production plants is a viable way of reducing the plants carbon footprint. In fact, we’ve signed a deal for 90 MW of hydroelectricity that will be used to gradually power the PLC from 2024 onwards and will enable us to decommission old and inefficient gas turbines.
How should LNG retain its social licence?
At PETRONAS, we believe that there are two key areas for the LNG industry to look into to retain its social licence. First, by decarbonising the LNG production process. Second, by leveraging LNG’s proven technologies to accelerate the development of clean and renewable energy sources.
Allow me to share ongoing examples of how we are doing so. Firstly, we continuously strive for Operational Excellence to keep our assets and operations not just in order, but more importantly, optimised, efficient and clean. For example:
-We aim to reduce our Scope 1 and 2 GHG emissions from our assets, at 49.5mn mt of CO2 equivalent by 2024 to achieve our net zero carbon emissions goal by 2050. We continue to mitigate and reduce emissions at our operations based on the guiding principles of measure, reduce and offset.
-From 2024 onwards, PETRONAS LNG Complex (PLC) in Bintulu will gradually be powered by hydroelectricity and will allow us to decommission old and inefficient gas turbines.
-By 2025, carbon capture and storage at offshore Sarawak gas field (Kasawari) will come on stream with the potential to reduce CO2 emission of around 76mn mt.
-We are decarbonising our marine transportation by applying gas burning of LNG ships at both our buyers and our own terminals (18 terminals) during loading / discharge.
-We’ve upgraded our LNG vessels with Hull Performance Solution technology to cut bunker consumption, reducing around 18,000 mt of CO2 emission annually.
-We implemented a digital solution at the PLC, designed to increase energy efficiency in the liquefaction process and to optimise boil-off gas (BOG) use and raw feed gas for fuel gas consumption known as ARIES.
-In addition, our two floating LNG (FLNG) facilities have adopted N+0 gas turbine generator (GTG) operating philosophy to reduce the total fuel gas requirement for the GTGs and zero-flaring practice during offloading to ensure optimal operating conditions.
Secondly, we are working with multiple partners to grow our portfolio of low carbon solutions such as:
-Collaborating with key industry players, such as JERA, to develop ammonia and hydrogen.
-Conducting a joint technical and commercial feasibility study with ENEOS Corporation (ENEOS) to produce low carbon hydrogen from PETRONAS’ existing facilities, production of green hydrogen from a new hydro-powered electrolyser facility, and hydrogen conversion into methylcyclohexane (MCH).
-Developing a carbon sequestration hub with Shell to collect, aggregate and sequester carbon from various domestic and international sources.
-Combined efforts with Japan Petroleum Exploration Co. Ltd. (JAPEX) to evaluate optimal capture, storage and transportation methods, as well as estimation of emissions, capture volumes and monitoring methods of CO2 stored underground.
-Formed a global alliance and col- laboration for LNG bunkering at four locations in Japan. Offshore wind and LNG bunkering alliances to develop solutions in hydrogen, ammonia and carbon capture and storage (CCS).
-Utilising CCS technology (JOGMEC, JX Nippon Oil) for studies to develop high CO2 gas fields in Malaysia.
This feature was originally published in the LNG2023 Daily, produced by NGW during the LNG2023 conference in Vancouver July 10-13.