Gas Industry Needs to Find New Solutions, Say Energy Leaders
The gas industry has to find a way to be a valuable instrument for an efficient power transition, adapting to the current situation in order to overcome the “huge uncertainties for the future of gas in Europe.”
New solutions are required in a moment of a changed business environment. That was the message delivered by three leaders of energy companies speaking in occasion of the European Autumn Gas Conference 2013, which took place in Brussels on Tuesday and Wednesday.
“The gas industry has a common interest to take advantage of its potential by reviewing its approach,” Didier Sire, Head of Strategy, Regulatory Affairs, Enterprise Risk Management and Sustainable Development at GDF Suez, said on Tuesday
The industry's approach has to be based on innovation and cooperation between the industry players, said panellists. Cooperation could be a way to decrease the risks for the companies.
“Uncertainties on the demand side will create new commercial relationships,” explained Philippe Sauquet, President of Gas & Power at Total during the first session of the day.
Despite industry concerns, Total also sees a 2% yearly increase of the world gad demand by 2030. Asia is expected to drive this trend, with liquefied natural gas seen as the fastest growing segment. At the same time, Total expects Europe to consume more gas in the next 20 years.
GDF: HUGE UNCERTAINTIES
GDF Suez was more cautious about Europe, seeing “huge uncertainties for the future of gas in Europe.” Sire said that gas is no more competitive in power generation, arguing that the collapse of the ETS system and the competition of coal added artificial stress on the gas industry.
Sire showed that the price of CO2 plunged from € 29/t in July 2008 to €5/t in October 2013.
According to GDF Suez, a coal-to-gas parity is therefore difficult to achieve. It would require a CO2 price 12 times the present one or significantly different market conditions for coal and gas. Sire said that the parity would be achieved if the gas prices were half of the present ones or, alternatively, the coal prices were twice the ones registered in autumn 2013.
The ways out to these huge strains hinge on a collaboration of politicians and gas industry, said Sire. The European Commission was clearly called to review its gas policy, while the industry was asked to adapt to the current situation.
“Gas sector must also rethink its business,” suggested Sire, not ruling out long-term contracts. According to him, long-term contracts still make sense, as they allow to finance and develop new projects.
POLITICS OR INDUSTRY? DIFFERENT VIEWPOINTS
As said by Sire, the possible approaches to overcome the current situation are two: an intervention of politicians or a rethinking of the business model of the gas companies.
If a change of the industry was agreed on by all three panellists, the role of European politics was a more discussed issue.
Total’s Sauquet said that an intervention of politicians is needed. He claimed that gas is theoretically highly competitive in power generation.
“Gas has been made uncompetitive by regulation,” said Saquet, pointing out that the subsidies to renewables distort the market.
On the other hand, Wim Groenendijk, head of the International and Regulatory Affairs department of Gasunie, said that companies have to adapt to the present situation. They have to understand how they can be a valuable addiction to the energy transition.
“Instead of asking what the others can do for us, the gas industry needs to consider how it can contribute to the energy system of the future,” said Groenendijk, suggesting that the gas industry has to follow the needs and the requests of the public. Politicians and members of the civil society are entitled to ask for changes and the industry has to find a way to keep up with those requests.
According to the head of the International and Regulatory Affairs department of Gasunie, companies have to find the best way to minimize costs for society and, through innovation, find new applications. Gas in transportation was given as an example.
“As a gas industry we should look at ourselves first and foremost to ask what we can offer to help to bring about these structural changes that the society wants,” concluded Groenendijk.
Sergio Matalucci