The Increasing Importance of Natural Gas as a Major Part of the Climate Solution
Dmitry Sokolov Head of EEFD
Hussein Moghaddam Senior Energy Forecast Analyst of EEFD
The 25th Flame Conference - Europe's largest gas and LNG conference - was held on 13-15 May 2019 in Amsterdam.
A large number of senior decision-makers from more than 45 countries attended. A variety of topics was covered during the conference’s keynote presentations, global LNG and gas pricing summits, and boardroom working groups. Attendees examined the latest development of energy and gas markets over the short-, medium- and long-term, discussed the future of gas, primarily focused on Europe, and addressed the most prominent developments in the oil and gas sectors, gas technologies, recent LNG projects, the impacts of climate change and the need to transition to a decarbonised energy system.
Following the Long Term Strategy of the Forum to support the GECF Member Countries in assessing and forecasting natural gas market developments, with the objective to become a reference in natural gas outlooks and keep Member Countries informed and prepared to address challenges and benefit from opportunities that may arise in the future, a high-profile delegation from the GECF had the privilege of taking part in Flame 2019.
His Excellency Secretary General Dr. Yury Sentyurin participated in a debate entitled The evolution of gas: an integrated approach for an integrated European market. Dr. Sentyurin shared the GECF’s views on the prospects for the European gas market, the role that GECF Member Countries play in the security of supply, and the potential of hydrogen energy in the future energy mix, based on projections from the GECF Global Gas Outlook.
Decarbonising the EU’s energy system by 2050 was a primary focus during the conference. The EU’s 2050 energy strategy sees natural gas playing a significant role during the energy transition to 2030 or 2035, but beyond that, the role of gas in the EU’s energy mix is not clear.
Combining carbon capture and storage (CCS) with hydrogen production is a strategic solution that could play a significant role in the long-term.
The 25th Flame Conference had a main message: Natural gas is a major part of the climate solution.
Most of the presentations had below messages in common:
• During energy production, natural gas emits up to 60% less CO2 than coal;
• In the power generation sector, natural gas provides a stable base load to support
• Outside the power generation sector, natural gas is displacing more carbon-intense fuels in the industry, transport, and heating sectors;
• In the long-term, it is expected that natural gas will be converted to hydrogen and green gas, which will keep costs down while capturing and storing CO2;
• Gas infrastructure can serve as the backbone for hydrogen production in a hybrid energy system.
In this regard, the UK’s Committee on Climate Change recently released its "Net Zero" report, recommending that the UK step-up its greenhouse gas emission reduction targets to achieve net-zero emissions by 2050. The country is aiming for the most aggressive and ambitious climate target in the world. It would accelerate its current target of cutting emissions by 80% by 2050, compared to 1990 levels. Net zero means that emissions are balanced by an equivalent amount taken from the atmosphere.
Our attention is attracted by the presentation of energy economist Dieter Helm, professor of Energy Policy at the University of Oxford. In his presentation, he mentioned the consensus among experts that net zero emissions will be more demanding than the Paris Agreement goals. Policies focusing exclusively on energy use within national borders will continue to drive the deindustrialisation of European economies. This is only possible if clear, stable and well-designed policies to reduce emissions further are introduced across the UK’s economy. Current UK policies are insufficient and reaching net zero emissions will require new policy measures. During his address to the conference, professor Helm said that natural gas is the cleanest of fossil fuels and switching from coal to gas reduces emissions quickly. Gas has many advantages over other fossil fuels and its demand is likely to rise, at least in the short- to medium-term.
Interfax Chief Energy Analyst, Peter Stewart, spoke about LNG demand growth in Asia and the impact of Asian demand on European supply. He said that global liquefaction capacity stood at 406 mt in 2018, and record FIDs expected in 2019-2020 could potentially add about 200 mt of new capacity by 2025. Chinese gas and LNG demand growth are slowing after a period of strong growth, due to the policy switch from coal to gas that was spurred by air quality issues. However, climate protests in many Asian countries (such as India, Australia, Taiwan, Japan, and New Zealand) show that the climate change issue is a hot topic across the world. Mr. Stewart argues that, while the gas industry believes a combination of gas and renewables is positive for the environment, the climate change agenda sees gas as a problem rather than a solution. Strong carbon price mechanisms, investment in large-scale carbon capture and use or storage, and the development of hydrogen and green gas will be required to sustain gas growth in the future.
According to the Hydrogen Envoy to the Dutch Ministry of Economic Affairs and Climate Policy, Noe van Hulst, The Netherlands has already entered into a collaboration with its neighbouring countries to develop the hydrogen economy. However, the European Member States currently have different rules governing the blending of hydrogen into natural gas pipelines. Agreeing on a fixed hydrogen blend for European gas grids, even as low as 2%, would create a huge market for hydrogen. Blue hydrogen produced from natural gas combined with CCS would establish infrastructure for green hydrogen, and hydrogen development has been encouraged by the current European Commission for decarbonising the energy system.
There were also interesting arguments about the European gas demand and power sector. Andree Stracke, the Chief Commercial Officer of Origination and Gas Supply at RWE, a German electric utility company, said the 21st Conference of Parties (COP21) considered coal, oil, and gas as hydrocarbons in one bucket. However, gas is cleaner and should at least be considered as a transition fuel, along with renewables, but that takes real efforts.
As enshrined in the GECF Heads of State Declarations, LTS, and Priority Objectives, natural gas has a vital role to play in the global energy mix and in achieving the Sustainable Development Goals. Therefore, the GECF is planning to participate regularly at the Flame Conference in order to support the sovereign rights of Member Countries and pursue opportunities that support the sustainable maximization of the added value of gas for Member Countries.