Natural Gas' Future Role: No Sure Thing

In a panel discussion dedicated to envisioning the role for natural gas in the future European energy mix at the European Gas Conference 2014, featured speakers spoke about the obstacles to using more gas, offering possible mitigation strategies and ways to facilitate industry success.

Rune Bjornson, Senior Vice President Natural Gas, Statoil, suggested that on its present course – using less gas, but more coal - Europe would struggle to meet its climate change targets. Just take the case of Germany, he said, with it's USD 20 billion in renewable subsidies for infrastructure, households, etc.

He remarked, “Germany can't say 'on the one hand, I'm going to reduce emissions; on the other hand, keep burning coal.' They seem to have forgotten that renewables were a means to an end, and now, suddenly, they are very quiet on emissions.”

In contrast to that, he said he believed the new electricity market reform in the UK – together with other regulations – would push out coal in due course.

Alessandro Della Zoppa, Head of Long term gas supply negotiation, ENI, said his company did not expect to see any significant recovery in natural gas demand in the next 5 years, in light of what was occurring with EU regulations. Consumption was staying at 2008 levels, according to him.

He commented: “This level is more than 100 BCM/year below what we expected in 2008, when important decisions were taken in terms of infrastructure, supply model.”

This, he said, resulted in the oversupply problem.

On the supply side, he offered, “With the drop in demand one would wonder why we see prices staying more or less where they were. This is very important for Europe, which will stay dependent on imports, at least for the foreseeable future.”

This, he said, set the framework for discussions with all of Europe's suppliers. “Discussions are really key if you want to promote natural gas; of course, our ambition would be to promote natural gas in a sensible regulatory framework, but we shouldn't forget that coal has become cheaper and so we have to do whatever we can, from ETS to regulation, to get gas and gas infrastructure cheaper and cheaper for European industry.”

He added that Italy had been “feeling the pain” of demand having dropped.

Addressing the future of unconventional gas, from the perspective of a “coal country” (Poland) Kamlesh Parmar, CEO, 3Legs Resources, offered his perspective. Of that morning's session, he recalled, “One thing we've been doing is talking very generally about EU targets and requirements; the question then is, how does each member state fulfill that?

“With Poland, you've got a country that's heavily dependent on its indigenous coal for domestic energy: it imports 70% of its gas requirements, 98% of its oil requirements. Those imports generally come from the east, so there's a geopolitical element for Poland there as well – reliance on a particular source of supply.”

As Poland was in the EU, he explained, it needed to meet the Union's climate objectives.

“And one of the things Poland has done is push forward with the potential for shale gas, because it's clear that there is a large potential there – what we don't know yet is, quite how large that will be in reality,” he said.

One of the keys to such exploration in Poland, according to Mr. Parmar, was that it did not require subsidy. “This activity, in general, is done by the private sector,” he added.

He said that he was confident that in 2014 Poland would establish whether there would be commercial production from Polish shales, that there was a lot of activity contributing to that.

He offered, “The Polish government is, therefore, supportive, and we have a similar situation in the UK, which is deciding that it wants to support shale gas as well. There are different dynamics of course, but underlying this is, you can produce gas that is from a domestic supply, you're creating jobs and infrastructure as well, so those are added benefits.

“In a nutshell, is there a demand for unconventional gas in Europe? I think there is. It certainly can make a difference at a national level and definitely at an EU level as well. Member states need to be given the opportunity to develop their national resources within this network,” said Kamlesh Parmar.