A "Golden Age" of Sorts

Three years prior, Jean-Marie Dauger, Executive Vice President, Engie, had touted the wild prospects for the "Golden Age of Gas." In a Q&A at the World Gas Conference (WGC) in Paris, France, he was asked if he stood by the enthusiasm he had expressed at the WGC in Kuala Lumpur. While his opinion has not changed, Mr. Dauger provided a few caveats, as well as insights on how developing economies might use natural gas as an element for development and fuelling their economic growth.

One change he noted, however, is the effect on natural gas of the drop in oil prices, and the connotations for the spot LNG market. “There is the general impact of imbalance between the demand and production, which is pushing prices down for oil, and incidentally for gas.”

While he contended that the price will eventually go back up, he said, “not necessarily soon.”

Mr. Dauger said this will have impact on some of the most costly projects, particularly in the LNG market, but it depends on how far and how deep the change goes. Increased volatility, he said, is a given.

Of climate change and lowering carbon emissions, he commented: “There is no government which is saying that this is not an issue – it's an issue for all. Definitely the impact of the energy business on the country, economy and social atmosphere, and the environment in general, has gained in focus, as we have seen in the US and China.”

The energy industry's vision of technology has also changed in the last 3 years, according to Mr. Dauger. “Of course technology contributes to development and greener solutions, but I think that since Kuala Lumpur there has been a change in our mindset,” he offered.

One way is how the energy industry sees the role of solar and a decrease in the cost of solar energy solutions, which he deemed “extreme.”

“We are now reaching some sort of economic viability in many more places than we intended to think only 3 years ago. The second thing is the IT industry bringing solutions for the energy business, including for the gas business.”

He offered LNG as an example, with 16 construction projects underway for floating LNG operations. “Floating liquefaction units will be put into service soon whose efficient operation could quite dramatically change the accessibility of LNG,” he said.

Such elements, he said, will have an impact on the natural gas industry's model and how it sees investment, but it does not change the industry's vision.

Mr. Dauger explained: “The fundamentals haven't changed. Basically, the world economy needs more energy - the population is going to grow, development in emerging regions – all of this, in all scenarios, provides for an increase of energy demand by something like nearly 40% by 2035.”

He said this would require numerous solutions to fuel global energy demand, but that gas has the most important role to play.

Addressing the energy challenges of the non OECD countries, he said it will be necessary to access energy for their populations and economic development, as great portions of the population sometimes have no access to electricity.

He quipped, “Without energy, nothing is possible, so this is definitely the most important challenge that they have.”

Second, Mr. Dauger pointed out that many such economies are dependent on a sole source of energy, for example Brazil's dependence on water levels, or China's need to mitigate urban pollution by diversifying energy sources.

Decreasing dependency on one source of energy, he opined, requires vision for attracting long-term investment as well as development of the proper regulatory regimen set up for investment, which involves defining a set of rules to attract investors, preparing them to be in the game for the long-run. “Regulation, confidence and reliability are a must; without them, I think it's very difficult to attract investment.”

Defining prices for those investors, he added, is also crucial, given the size of the investments.

The need for infrastructure is also crucial for poor countries, he said. “It's not only a matter of technology but investment, of regulation.”

Finally, he pointed out their need to control and regulate demand, especially for countries importing energy.

The session moderator asked Mr. Dauger what the benefits of increasing the share of natural gas usage for such countries would be.

He offered, “I don't think that gas will be the solution; it will be a set of solutions. Gas is definitely part of the solution for many of the reasons that you all know: accessibility, reserves are high, and so on, flexibility. Gas may be an element in the equation of sustainability and development.”

According to Mr. Dauger, the conditions are quite favorable for developing natural gas around the world, taking into account regional differences.

“Look at China and India – they are developing and taking steps to change their internal gas price system to better balance market attractiveness and the competitiveness of gas,” he said.

In Latin America, he added, governments' strong support for LNG had resulted in several regasification projects.

Noting the leading role being taken by LNG in the international trade of natural gas, he said that the LNG market has doubled since the turn of the century and will also double again in the next decade, with LNG for the transport sector opening up new doors.

Engie, he said, is part of such development. “We are extremely anxious to contribute to gas development everywhere in the world, and emerging regions in particular,” he stated, citing important projects, for example, in Indonesia, but also made brief mention of projects in India and Mexico.

In conclusion, Mr. Dauger said he is very optimistic on the prospects for natural gas. “I think we have to continue to promote natural gas individually, proactively.”

-Drew Leifheit