Gas Industry Set to Rewrite its Story: GECF Guest Speakers
The Gas Exporting Countries Forum (GECF), the global platform of the leading gas producing nations, held the latest in its series of the GECF Monthly Gas Lecture, with the guest speakers – Chris Levell and Ed Shires from Gas Strategies – encompassing the current and next chapters of the story of natural gas markets.
The workshop, entitled ‘Time for new chapters? Established supply and new market development’, was held virtually and attracted a high turnout, comprising of industry peers, members of the academia, and diplomatic corps. The Secretary General of the GECF, HE Yury Sentyurin, kicked off the proceedings and noted that whilst the COVID-19 pandemic has caused jitters in the global energy demand, supply, and pricing, natural gas will continue to enjoy tremendous promise in the long run.
Furthermore, he urged “the need for holistic consolidation and increased cooperation amongst natural gas producers and consumers to ensure sustainable energy security and resilient natural gas supplies.”
“As an organisation dedicated to advancing the gas industry, the GECF is steadfastly navigating any changing market realities and continuing on its path to make the energy landscape beneficial and accessible for everyone,” said HE Yury Sentyurin.
The GECF forecasts natural gas demand to decline in 2020 by 2.8% in the best-case scenario and up to 6% in the worst-case scenario. Moreover, gas consumption in 2050 could be 2-3% less (or between 100 and 200 billion cubic meters less) than the volumes it had projected in February 2020.
The Forum, a coalition of 20 leading producers and exporters of natural gas jointly controlling 72% of their proven reserves, 46% of the source marketed production, 55% of pipeline, and 61% of LNG exports across the globe, emphasised on strong economic and environmental reasons for the strategic alignment of government policies towards natural gas.
Chris Levell and Ed Shires, managing consultant and consultant at Gas Strategies respectively, observed that the current chapter in the gas industry is drawing to a close, thereby prompting the need for established gas players to align with the need of the emerging gas importing markets.
The consultants stated that 47.7 million tonnes of LNG contracts will be coming to an end over the next three years with approximately 87% (41.5 million tonnes) of those volumes belonging to the GECF Member and Observer Countries. These contracts are underpinned by a gas supply that is reaching a plateau or in decline on a worldwide scale. Moreover, they noted that as gas fields and infrastructure become more mature, there is a mind-set shift on cost which changes the behaviour of market players.
According to them, on the demand side, new LNG market developments have been observed with 97.6 million tonnes of LNG import capacity coming online or under construction this year, and around 18 million tonnes of it is considered as new entrant in the gas business. As an example, Brazil and India, which have been seen as emerging markets in the natural gas business a few years ago, have now really established themselves as significant market players within the gas industry.
“And the next wave of emerging markets, the likes of Bangladesh, Pakistan, and – potentially – Vietnam, are yet to establish themselves as emerging markets, so that next chapter is yet to quite happen,” the experts stated.
The experts said that the established gas suppliers have the benefit of their initial capital having already being recovered, with higher returns to the government and other stakeholders. However, they pointed out that there will be challenges surrounding competition for investment from international oil companies, the price at which contracts will be renewed, thereby introducing the possibility of stranded gas and also competition from lower cost sources of gas.
Meanwhile, new market developments will be enabled by technological innovations and the commoditisation of LNG. However, new markets will be challenged by availability and source of finance, creditworthiness of buyers, country risks, and the ability of the new LNG supply to survive in the face of any uncertainty surrounding the demand for gas. Depressed commodity prices, global recession and decarbonisation will be a challenge to the gas industry at large.
Whilst laying particular emphasis on the need for collaboration amongst industry players to deal with these challenges, the guest speakers concluded that it is necessary for governments to take an increased role in becoming project enablers. In addition, the Gas Strategies specialists saw huge opportunities for established gas provinces, such as the GECF Member Countries, to create new markets with clear objectives and with the foresight of adding the greatest value to individual countries.
Gas Strategies is a leading commercial consultant firm in the gas and LNG industry and, working with governments, state entities, private sector, and financial players, supports its clients with their most poignant challenges and opportunities through all stages of industry and gas sector development and their project life cycles.
The GECF Monthly Gas Lecture series is a platform for industry leaders and experts to share their knowledge on contemporary issues related to the gas industry and its interconnected influencers of geopolitics, economy, and sustainability. The series has hosted some of the most influential figures from around the world to exchange insights and shape perspectives.
More information about the GECF Monthly Gas Lecture series can be found here: https://www.gecf.org/events/list/monthly-lecture