Pandemic, Russian aggression wreak havoc on gas markets
COVID-19 was just the beginning of two years of turbulence for the global natural gas industry, the International Gas Union (IGU) says in its Global Gas Report 2022, released May 25 at the World Gas Conference in Daegu, South Korea.
Pandemic-related lockdowns in 2020, with brief periods of excess supply and very low prices, gave way in 2021 to tight markets, extreme price volatility and a compounding geopolitical challenge this year to energy security in the wake of Russia’s invasion of Ukraine.
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To achieve the Paris Agreement goal of limiting global warming to 1.5 °C and fulfill net zero ambitions by 2050, greenhouse gas emissions will need to peak before 2025, presenting a real opportunity for natural gas to make a significant contribution.
“Within the limited time available, governments, policymakers and industry will need to develop realistic and achievable strategies to curb emissions across all sectors,” the IGU says. “Natural gas, together with decarbonised and low or zero-carbon gases, will play a critical role in supporting these decarbonisation initiatives.”
The post-COVID period will bring renewed challenges in addressing emissions, which have resumed an upward trend since 2020, the IGU said, particularly in the power sector, where a post-pandemic demand surge was layered on top of a move back to coal-fired generation as gas prices outpaced those for coal.
Further, the emissions surge has been exacerbated by the global energy supply tightness and the 2022 Russia-Ukraine conflict.
Reversing this shift from gas back to coal will require a strengthened focus on gas availability, emission prices and CO2 and pollution policies.
Russia’s invasion of Ukraine has brought the issue of energy security – and particularly natural gas supply security – to the forefront and highlights the value of developing diversified supply sources.
Additional infrastructure – Germany alone is fast-tracking the development of four LNG import terminals – can increase security, and while extreme weather in some parts of the world have put renewable energy to the test, natural gas has proven time and again to be a reliable source of electricity generation that can offset shortfalls from other sources.
The gas industry’s future, the report notes, will be closely tied to its sustainability, with immediate emission reduction benefits due to its low-carbon profile. Over a longer term, even greater reductions will flow from the gas industry’s status as an enabler of low- and zero-carbon technologies, such as hydrogen, biomethane and carbon capture, utilisation and storage (CCUS).
Blue and green hydrogen accounts today for less than 1% of hydrogen demand, while biomethane represents just 1% of gas production, but interest in both new gases is gathering momentum, with more and more countries committing to targets and funding.
The EU, for example, sees 35bn m3 of biomethane and 20mn mt of clean hydrogen demand in Europe by 2030 – about 25% of the EU’s total current natural gas market.
“It is clear that gas infrastructure investment remains critical for meeting global energy demand,” IGU president Joe Kang said. “But this investment and future growth of the gas sector comes with a responsibility to be compatible with the goals of the energy transition and the Paris Agreement. New infrastructure investments should be future proofed to assure investors of their long-term environmental and economic value.”
This feature first appeared in the daily newspaper of the World Gas Conference 2022, which took place in Daegu, South Korea, between May 23 and 27, 2022.