Gas is needed “indefinitely”: al-Kaabi [LNG2023]
Natural gas will be needed “indefinitely” as a guarantor of baseload energy supply, even as the capacity of renewables continues to grow over the coming years, Qatar’s energy minister and QatarEnergy CEO Saad Sherida Al-Kaabi said in a keynote address on July 11.
“Gas is absolutely needed, as the cleanest fossil fuel, as a baseload supplier of electricity, and for powering all kinds of factories and manufacturing,” he said. “Some people say that by 2050, we will need no more gas. I think we will need gas indefinitely as a baseload.”
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Qatar, the world’s biggest LNG exporter in 2022, took a final investment decision (FID) in February 2021 on the $29bn North Field East (NFE) expansion project, due to raise Qatar’s liquefaction capacity from the current 77mn tonnes/ year to 110mn tonnes/year by the middle of the decade. It is currently preparing to greenlight North Field South, which will increase capacity even further to 127mn tonnes/year.
“There were doubts at the time about whether that much investment was needed,” al-Kaabi said, commenting
on the decision to go ahead with NFE. “Especially given the discussion about the energy transition, and the demonising of investments in oil and gas.”
Now perspectives have changed, he said, in light of the energy supply crunch, which was exacerbated by fallout from the conflict in Ukraine that began last year.
Concerns about security of supply, affordability and sustainability move in cycles, he said.
“If you look back at history, in the 1970s there was the oil crisis and the concern about security of supply, and then in the 80s and 90s it was about the affordability of oil and gas,” he explained. “And then after the 1997 Kyoto Protocol it was all about the sustainability of energy.”
Once more the cycle is repeating, he said. Concerns about sustainability are now giving way to concerns about security and affordability.
The unprecedented spike in global gas prices was in no small part due to the Ukraine conflict and Russia’s subsequent drastic cut in pipeline gas supply to Europe. But high prices today are also the result of a broader trend of under- investment in supply that goes back a decade, al-Kaabi said. And the current scarcity of supply would have been much more painful had it not been for unusu- ally warm weather last winter.
“And investment is still not coming in at the level we think it should,” he warned.
Talk of rushing to ditch fossil fuels in developed nations is “selfish,” he added, given the growing energy needs of the developing world. “There are a billion people in the world that are still deprived of basic electricity that we need today,” he said.
The minister pinned the blame on legislators that have pushed far too fast a transition away from fossil fuels in the current energy crisis.
“We need to be realistic about what we can achieve,” he said. “We need a base- load of sustainable and reliable energy like gas, and like nuclear, to cover the intermittency of renewables. We need to do more with renewables, but we need a balance.”
He went on to stress the sustainability of Qatari energy, noting that the country boasted the largest CO2 sequestration in the MENA region. Today it sequesters more than 2mn tonnes of CO2 annually, and this will rise to 11mn tonnes within a few years, he said. Qatar is also using solar energy to power its LNG facilities.
“So the carbon intensity of our LNG is probably the lowest in the world,” he said.
Forty percent of new LNG due to arrive on the market by 2029 will be produced by Qatar, he said, adding that Doha avoided short-term thinking about energy supply and pricing.
“If you look at anything on a short-term basis, then all your decisions are completely skewed, whether it’s a very low price environment or a very high price environment,” he said.
Qatar’s preference is long-term contracts structured with stable pricing, he said. The country recently signed the longest ever LNG contracts on record, with China’s Sinopec and CNOOC, spanning 27 years.
“If it wasn’t for a fair and sustainable price that would be sustainable for 27 years, they wouldn’t have signed and we wouldn’t have signed,” he said. “We’re not greedy, we don’t try to take advantage. We are very fair in how we structure our contracts.
The minister predicted that Qatar would sign contracts for a record amount of LNG supply this year – a record not only for the country but the entire industry.
“I’ve never said something that I do not deliver on,” he said. “And I don’t think such a year will ever be repeated again.”
This feature was originally published in the LNG2023 Daily, produced by NGW during the LNG2023 conference in Vancouver July 10-13.