When it comes to energy, global sustainability and growth are actually compatible, especially when natural gas is tapped for its environmental and economic potential, say global gas experts.
The keys to success are unified messaging, two-way dialogues with policymakers, and leveraging the flexibility of natural gas to suit regional and local needs.
In fact, “sustainability will play a central role in the growth of natural gas,” said International Gas Union President Joe Kang. “It will be a determining factor in many cases.”
Kang’s theme for the IGU’s next triennium, “A Sustainable Future, Fueled by Natural Gas,” calls on the sector to position gas as a tool to reduce greenhouse gas emissions globally and promote clean urban air, with infrastructure investments to maintain a healthy place for gas in the global energy mix.
IGU’s regional coordinators agree: In the wake of COP24, natural gas can promote emissions reductions, even as rising global population drives up demand for energy. Some regions have made major strides, while others are just embarking on the journey.
The global equation for balancing natural gas growth with sustainability and economic development tends to lean heavily on the developing world to abandon heavy polluters. But Europe represents the other extreme, said Andrea Stegher, senior vice president at Italian gas utility Snam. The continent’s 2050 target of net-zero carbon dioxide emissions is driven largely by renewable energy sources. That’s teaching the natural gas industry to speak in “renewable language” to keep its place at the table—for instance, teaming with agriculture on the Gas for Climate 2050 initiative, or placing gas within a minimalwaste circular economy.
“This is stimulating a progressive enlargement of what the natural gas industry has traditionally considered as its own playground,” Stegher said.
In North America, the case for rising use of natural gas is built on strong evidence of gas as a cleaner energy for home heating and power, and as a transportation fuel, said Canadian Gas Association CEO Timothy Egan. As an example, Canada’s natural gas emissions profile has remained “virtually level, even as the energy system is moving greater volumes of the product to Canadian homes and businesses,” he said.
In the Australasia region, both Australia and New Zealand are “exploring development of hydrogen from renewable power,” said Australian Gas Industry Trust Chairman Graeme Bethune. Plus, Australia’s Gorgon liquefied natural gas project has one of the world’s largest carbon capture and storage projects, “but unfortunately, it is not operating successfully yet.”
From the Russia, Black Sea and Caspian area, IGU Regional Coordinator Marcel Kramer sees “generally strong” prospects for natural gas to promote emissions reductions—particularly where gas replaces coal for power generation or other heavily polluting fuels, such as ship bunker oil.
Russia has also seen a focus on continuous control and reduction of methane emissions and new carbon-removal technologies. The next step is determining “whether and when these can be applied on a large scale,” said Kramer. “Cost competitiveness is crucial. It can come from the technical solutions and from the opportunity to avoid additional taxes on carbon emissions as and when these are applied.”
The East Mediterranean and the Middle East enjoy abundant solar energy, “but most countries are still heavily dependent on fossil-fuel power generation,” said Charles Ellinas, CEO of EC Cyprus Natural Hydrocarbons Company. The region’s per capita carbon emissions are almost 50 percent higher than the world average, but the political will to pursue COP24 goals and gas decarbonization “is seriously lacking.”
“Change can take place if proposed solutions are commercially competitive, help reduce energy costs and contribute to a better quality of life,” said Ellinas. “Reduction of carbon emissions will then be the outcome. It will not be the cause of change.”
Skyrocketing demand for energy in the 10 nations of ASEAN—the Association of Southeast Asian Nations—demonstrates the potential of natural gas to help reduce carbon dioxide emissions while promoting economic growth amid rising populations, said Malaysian Gas Association President Hazli Sham Kassim.
Still, 10 percent of the “power-hungry” region lacks electricity, and ASEAN is predicted to be the world’s only growth spot for coal-fired power generation through 2023, according to an International Energy Agency forecast, said Kassim.
“To meet the projected electricity demand requirements, ASEAN policymakers will need to address the energy trilemma—energy security, energy affordability and energy sustainability—from markedly different socioeconomic starting points,” he said. “Despite this clear challenge, there is broad convergence with policymakers focused on balancing the objectives of a reliable, high-quality supply against requirements for cost-effectiveness and environmental sustainability to bring about maximum benefits.”
U.S. Innovation Leads The Way
The United States is leading the world in greenhouse gas emissions reductions, and its natural gas industry’s technology and innovation contributions are key factors.
In 2016, carbon dioxide emissions from power generation in the United States were near 30-year lows, “in large part due to greater use of natural gas,” said the American Petroleum Institute in its report, Climate Change & Energy.
The bulk of the oil and natural gas industry’s $89.9 billion investment in emissions-reduction technologies—nearly $50 billion—has gone into advanced end-use technologies, including efficiency improvements, carbon capture and storage, and advanced technology vehicles.
Examples of innovations include:
Groundbreaking ideas and partnerships are “helping make new technologies cost-competitive,” said Timothy Egan, IGU’s North America regional coordinator. While the world can take lessons from “the effectiveness of North America’s gas delivery systems to deliver energy efficiently,” the region also derives strength from constant learning and “monitoring what our industry colleagues in other markets are doing,” he said.
But emissions reductions are not just a climate change issue. There’s also the public health issue of clean air. Urban air-quality strategies are driving future growth in gas consumption, but no single set of best policies is emerging, said Kang. Gas offers versatility in varied landscapes, so presenting “the right policies in the right areas” builds the industry’s prospects worldwide.
“Policies that promote the use of gas are usually motivated by solving a problem or a set of problems, not just supporting gas for gas’s sake,” he said.
In Canada, such localized policies and projects have tackled the challenges of outlying areas, where residents often depend on higher-emitting, higher-cost, less-reliable fuels for heating and power, said Egan. Infrastructure funding from federal and provincial governments “can enable communities to get access to a better source of energy—access which then becomes a foundation block for strong growth in those communities,” he added.
In Latin America, the World Health Organization cites poor air quality as one of the main threats to children’s health and mortality, but policies to promote clean fuels are lacking in such countries as Mexico and Chile, said Naturgas President Orlando Cabrales Segovia.
“Latin America needs comprehensive policies that establish an environmental regulation related to air quality in urban areas [and] that guarantee the use of clean technologies such as natural gas,” said Segovia.
China’s example shows how gas deployment can solve these dilemmas, said Kang. Its gas expansion policy, striving toward 10 percent of domestic energy mix by 2020, is part of the government’s overall clean-air efforts, said IGU Vice President Li Yalan, who is also chair at Beijing Gas Group. The policy has achieved “unprecedented growth” in natural gas consumption, from 2 percent in the mid-2000s to its current 7 percent, she said.
The effort took a multifaceted approach. It established supply availability and security through domestic production and imports, devised policies identifying natural gas as “integral part of modern energy structure,” and strives to increase demand through cost competitiveness and consumption growth, while reducing financial and regulatory barriers to gas infrastructure.
“The key lesson has been that coal-togas switching really works and works fast in cleaning up the air,” said Li. “Beijing, Shanghai and many of the northern areas where conversions were completed saw clear skies.”
Russia, too, has made progress in reducing carbon dioxide emissions, “and even more on particle emissions,” by ramping up the introduction of gas, including in the mobility sector, said Kramer.
“Urban and other gas infrastructure installation requires significant knowledge and advance planning,” he said. “This also applies to developing countries. Furthermore, secure continuous gas supplies at an affordable price are crucial.”
Expected to grow as a share of the global energy mix, gas faces “a tremendous opportunity” as measures adopted over the next five years determine the feasibility of meeting Paris Agreement targets, Kang said. Switching to natural gas in existing energy systems and investing in gas infrastructure offer “immediate wins for emissions targets.”
Sustainability is one of three critical levers expected to fuel future growth. The other two are competitiveness and supply security.
“The industry must promote the environmental sustainability of gas as an instrument to reduce urban air pollution by developing low-carbon technologies for gas, integrating renewable gas sources into existing infrastructure and limiting methane emissions,” Kang said.
The region-by-region picture shows bright spots, such as growth in demand and production in Central and South America and faster-than-expected growth in Canada. But some areas remain hampered by lack of infrastructure. As Li put it, gas is ideal for cities, especially in the developing world, but “if there is no infrastructure, cities cannot access it.”
In ASEAN, infrastructure limitations have dampened creation of a common gas market, said Kassim. In Latin America, new projects and investments are driving exports from such countries as Argentina, Peru and Ecuador, but “unfortunately, Mexico has suspended the energy opening initiated by the previous government,” said Segovia.
“We believe that the country requires significant capital and industry know-how to foster investment in the upstream and midstream to gain energy security, develop its industry, create jobs and ensure better prices for Mexicans,” he said.
Meanwhile, the growth of LNG, plus major gas-field discoveries, are driving changes in the global energy mix. As Egan noted, LNG markets “aren’t just about massive projects.” Smaller volumes available for smaller users can contribute to “a much more robust market for a host of applications, big and small.”
Europe is now debating the midterm prospects for how gas supplies will move. The scenario offers “a greater potential for LNG, given increased availability worldwide,” plus the perspective provided by huge East Med discoveries and the evolution of Russian supply routes, said Stegher. Europe’s substantial regasification capacity makes the issue “not regas capacity but pricing competitiveness and commercial conditions that could associate liquefaction to final markets.”
That LNG regas capacity, he added, “could well serve as a gateway to many national markets considering the good interconnectivity in the market.”
Africa’s “largely undeveloped” natural gas potential is driving a shift away from oil to gas production, said Ellinas. Rising exports are delivering much-needed revenue, although the continent’s role as a net exporter contrasts with projections of a two-thirds increase in population and the doubling of gross domestic product by 2040.
“The priority should be to use these gas discoveries domestically and regionally to reduce carbon emissions, boost local economies and bring social benefits,” Ellinas said. “But there is more gas available than can be utilized locally. Export of this gas requires LNG facilities, existing and new, and possibly regional pipelines.”
The East Med is “a true hot spot for the oil and gas industry,” Ellinas added. Huge discoveries such as the Zohr gas field could be leveraged to find others, and the region’s proximity to the EU offers advantages, said Kassim. However, in a scenario seen worldwide, exports face stiff price competition from the vast supplies flowing out of the United States, Russia and Australia—which, as Bethune noted, will probably become the world’s largest LNG exporter this year.
“Priority should be given to utilizing East Med gas in regional markets,” Kassim said. “These huge gas discoveries in the East Med are now driving use of natural gas in power generation for economic reasons—locally produced, obviating the need for expensive fuel imports—and in doing so help reduce carbon emissions.”
“These huge gas discoveries in the East Med are now driving use of natural gas in power generation for economic reasons ... and in doing so help reduce carbon emissions.”
—Hazli Sham Kassim, Malaysian Gas Association
The global gas industry’s success as an advocate for political, technical and economic progress hinges on three factors, said Kang:
Investors are among the key audiences who need to hear cogent, unified messaging around sustainability and worldwide success, Kang added.
“The industry has been making incredible progress in reaching sustainability targets, but that often gets lost in reporting technicalities and rarely translates into the good news story for the public,” he said.
The two-way dialogue is central to translating COP24 rules—“a framework of commitments”—into action, said Kramer.
“Such actions can be most beneficial when they are decided upon and executed in a joint industry-government setting,” he said.
Regarding the resurgence of coal, the natural gas industry “has lots to speak about,” said Stegher. “Real” carbon dioxide pricing, as seen in the United Kingdom, can play a role, but at the global level the industry must “further foster a framework where gas can be really considered—as in Europe—a fuel always available and reasonably affordable.”
“In many developing countries, this is not the case yet,” said Stegher. “And it is where multilateral financing institutions should also contribute, not only promoting renewable energy projects, but also gasdriven solutions to foster energy and economic needs.”
As COP25 in Santiago, Chile, approaches, “the world is now at a critical point,” said Kang. In the “crunch year” of 2020, countries will have to demonstrate progress toward emissions targets even as they update those targets.
“Our priority for COP25 this year will be to engage where it counts and to ensure that the tremendous value of gas in meeting even the raised ambitions is duly recognized and reflected in the forthcoming new set of ambitions,” Kang said.