[NGW Magazine] Editorial: The Tipping-Point
If there was a sense of anything specific at the vastly sprawling World Gas Conference in the US capital late June, it was that the future for gas was looking not merely brighter than at any time in the last decade, but positively assured. Has the tipping point been reached, where the industry can go from defence to attack?
Long-standing doubts were repeatedly banished by references to gas demand rebounds, technology advancements finding new uses for gas; and the belief in many quarters that it is not the bridge fuel but the destination fuel – although the boundary between naturally occurring and industrially produced gas will blur as time goes by.
BP CEO Bob Dudley said the US was a good example of a country where gas has competed successfully with coal on economics, whereas in China gas had displaced coal owing to policies despite abundant coal. “We must make the case for gas in a way that removes any doubt about its long-term benefits,” he said. That would also mean solving infrastructure bottlenecks and establishing well-functioning markets.
Of course, it depends what timeframe the speaker has in mind where destination is concerned and nobody has a reliable crystal ball, but the next 30 years look to be gassy as coal use shrinks, the global population grows and the middle classes swell.
This explains why companies, long fearing a gas glut, are preparing to take final investment decisions all along the gas chain, as buyers sign heads of agreement with the upstream and engineers find new technology to bring down costs. Everyone is confident that even if it all else fails, there will always be spot gas demand in Asia, particularly India and China to soak up any surplus, as the president-for-life of the world’s most populous country has pretty much underwritten that side of the equation.
What appears to have brought the industry to this point is not just the very cold winter that pushed up seasonal demand, but the rising confidence that renewables will become very much more significant contributors to the energy mix of many countries than forecast. That means gas will be needed in large quantities as back-up or primary generation fuel.
An industry survey by technical consultancy DNV GL, conveniently published during the conference, picked up on the amplified enthusiasm for gas. It found that of the 800+ executives it asked, 44% were preparing for the shift to a lower-carbon energy mix and 64% of them were expecting to increase spending on gas projects this year. And 86% this year, compared with last year’s 77%, see gas playing an increasingly important role in the global energy mix next decade. As with all surveys, some of these figures need footnotes. A small number of mega-projects, even if doubtful such as the Turkmenistan-Afghanistan-Pakistan India line, can tip the balance; and a lot of the money is going on replacing the output from depleting fields. Even so, significant amounts of money are going into pipelines and LNG projects that will still be going strong in the mid-2030s, when the authors see gas demand peaking – a decade after oil has, in their forecast, gone into long-term decline.
Another theme was the need to end fuel poverty – which ties in with the ‘insatiable demand for gas’ argument. Surely, if gas is to have the future mapped out for it, it needs to win people over. It is still a fossil fuel, and so only better than coal; not actually good, from an absolutist's point of view. It therefore will need a social licence and this is one – perhaps not strictly speaking a market but certainly a sector – where an open goal lies invitingly ahead of it.
For some organisations, such as Sustainable Energy for All, the number of people – the world’s poorest – using unhealthy fuels for cooking and heating is “a stain on the industry,” according to SEforAll’s CEO Barbara Kyte: “Gas needs to be part of the solution.” Decentralised power will be important, and while renewables will suffice for some of that, it is easy to see a role too for trucking LNG. Pipelines are impractical – the last mile is the most expensive, as diminishing returns kick in – but gas-fired power stations, fed by truck or one of the numerous patented and approved LNG coastal delivery systems, would do the job.
The CEO of the Mozambican state energy company ENH, Omar Mitha, took up the cry, saying that wealth should be shared. Gas production can turn the economy through 180 degrees, from deeper debt to greater wealth. Some of that gas will be liquefied and exported, financing infrastructure and enabling industry and jobs at home. Some will be exported to inland neighbouring countries. But he said the international oil companies had a part to play as well. “Why not use the revenues from the bounty years, why not share wealth with the people?” he asked. They have the means, the know-how and the motivation.
Malaysian state-owned Petronas upstream head Anuar Taib, whose company’s strategy is to expand production overseas in order partly to continue gasification at home, also wants to alleviate the problem. He grew up in a household where, when he was four or five – the mid-1970s – cooking was done using wood and coconut shells and lighting came from a kerosene lamp. But there are still hundreds of millions of people in Asia living like that, he said. That sort of attitude will also promote gas.
NGW