Archive

No. 4, 2011


THE GOLDEN AGE OF GAS IS A REALITY


Oil of Russia magazine talks to Torstein Indrebo, Secretary General of the International Gas Union

Q: Mr. Indrebo, the International Gas Union was established in 1931. What was the impetus for the creation of such an organization back then? What would you name as major achievements of the IGU during these 80 years?

A: IGU was established on June 2, 1931, in London when manufactured gas was the basis for the gas industry. The impetus was sharing of technology and experience of operations among the members who initially were Belgium, France, Germany, Great Britain, Netherlands, Sweden, and Switzerland. Norway and the USA were observers.

Natural gas arrived in greater volumes in the 1960's when many large fields were discovered. Today IGU and the gas industry have become truly global with gas transport by pipelines and LNG all over the world. Gas is now providing a quarter of the world's energy supply. This share is likely to increase further.

IGU can be proud to have been part of this development by sharing best practice of operations globally in its working committees covering the whole value chain, and creating arenas for debate and networking. Our working committees currently have more than 800 gas experts participating - a good example of how IGU brings gas people together to share their knowledge.

The main IGU conferences are the following. The World Gas Conference which next time will take place in Malaysia on June 4-8, 2012, for the 25th time. The International Conferences and Exhibition on LNG, the next one LNG 17 taking place in Houston, the USA on April 16-19, 2013. The IGU Research Conference has become the most important conference for research and development in the field of gas. We will organize the next one in Korea on October 19-21, 2011.

With its more than 100 national and company members all over the world IGU membership covers about 95% of the global gas market. Traditionally, IGU focused on the technical and economical progress of the industry. The last few years we have added policy issues to our agenda as energy policy and regulatory issues have become far more important for our industry. Gas advocacy and communicating with our stakeholders outside the industry as policymakers, environmental organizations and the public at large is currently a high priority.

Q: Nowadays the exceptional role of gas as an environmentally friendly hydrocarbon fuel is acknowledged universally. Gas is often called a fuel of the 21st century.  According to your estimates, is the share of gas in the global energy mix notably changing today?

A: IGU studies released at the World Gas Conference in Argentina in 2009 showed a significant increase in the share of gas globally. These estimates now seems to be confirmed by other recognized institutions such as the International Energy Agency through their most recent study "The golden age of gas?".

We anticipate that gas will further increase its markets share in the power sector as well as in the transportation sector. The increase in supply capacity from the main suppliers, including Russia and Norway, in addition to the expansion in LNG plants have made gas supplies more diversified and secure. In addition the expansion of unconventional gas production has brought the gas price in major markets far below oil parity.

It is interesting to note that the large emerging markets in China and India are forecasting major increases in the gas consumption.

           

Q: Has the Fukushima nuclear disaster already had an impact on the gas industry?

A: The Fukushima incident has already impacted the gas market outlook as many countries now will review their policy on nuclear based power production. The public concern has increased significantly and will lead to closures of old plants and delays in new approvals. Some countries are likely to ban nuclear power for good. Germany has decided to close all their plants by 2022.

In the past, the lifetime of old plants was often extended, while in the future, this may not be the case. Chernobyl and Fukushima are incidents that have increased skepticism against nuclear. The only realistic alternative to base load power is either coal or gas, and being by far the most environmental friendly, gas should be the first choice.

Fukushima also demonstrates that life-cycle considerations must be taken into account, not only greenhouse gas emissions. Gas scores high on environmental issues, but also has a very positive safety record compared to other fuels.

           

Q: World gas prices traditionally depend on oil prices. Do you think that gas prices should be more independent?

A: Traditionally, gas competed with fuel oil in the heating market, hence we had the oil link which worked well for many years. But the price models vary a lot between Asia, Europe and North America. In Europe, the market has changed over the last decade with far more players both upstream and downstream with the liberalized market which has led to increased spot market pricing, and put pressure on the long term contracts with oil linkage price formulas.

The main market potential for gas in Europe and other markets is the power sector. The competitor there is not oil, but coal and nuclear. I believe that we will see new price models without the traditional oil link when gas enters the power market more forcefully in the future. The long term contracts will still be relevant, but the price formula may change.

           

Q: What other major challenges is the world's natural gas market facing today?

A: In my opinion, the main challenge today is our image among the policy-makers and the public in general. In IGU, we have realized that a far more active communication about the benefits that gas can offer in terms of being clean, affordable, reliable, efficient and safe. We must also better explain our contribution to society providing a basis for sustainable economic development creating millions of jobs world wide. The gas industry does not ask for subsidies, but contributes to the financing of governmental public programs.

We must talk more with stakeholders outside the industry and less to ourselves, so that the public become better aware of the enormous efforts behind the supplies of this prestigious fuel.

I will point in particular to the policies of governments and international institutions regarding climate change mitigation. Natural gas should have a far more prominent place in achieving the emission reduction goals, also because gas based power is flexible and can facilitate phasing in variable wind-power.

IGU has initiated several events and publication projects to enhance the visibility of the Union and the gas industry in general. The IGU publication and communication material can be freely downloaded from our website www.igu.org.

           

Q: What prospects do you see for compressed gas and LPG in the transport sector?

A: The transportation sector offers new opportunities for gas as the gas price is very competitive to oil selling far below the oil price. It is much cleaner with less CO2, and the low content of nitrogen oxides and black carbon (soot) which are almost non-existing, can improve local air quality and reduce serious health-problems and premature deaths from air pollution in big cities.

Infrastructure as filling stations and cars ready manufactured for gas is still an issue, but positive impact may be achieved rapidly by converting large bus and truck fleets to gas.

Gas in the form of LNG can be attractive for the heavy duty trucks crossing continents as well as in shipping. The world's shipping fleet today consumes petroleum products the equivalent of all LNG exported. Again, it is a matter of infrastructure and being able to offer supplies at a competitive cost.

Countries and Latin America and in Asia have achieved impressive results promoting gas for the road transportation. Europe and USA should learn from them.

           

Q: The global resources of unconventional gas are considered to be huge. Many countries having no experience in shale gas development claim that they intend to become large unconventional gas producers. Do you think it is real in the foreseeable future?

A: The experts tell us that geological layers similar to those in the U.S. are widespread. With the technological breakthrough in the USA and costs coming down, other countries will follow. It will take time, but I am sure that we will see unconventional gas produced in large volumes also outside North America.

The dramatic growth in gas reserves is good news for the industry and the world, as we now have gas reserves for more that 200 years. It also means that gas can increase its market share and realize its potential for solving the global energy challenges.

Q: Although natural gas is the most ecologically friendly fossil fuel, its burning causes emissions of CO2. How expensive is it to apply carbon capture and storage technology (CCS) for the gas industry today? Are there alternative efficient methods of greenhouse gas sequestration?

A: Gas emits CO2 when burned, but the lowest levels of the fossil fuels and much less of other pollutants. It is important to remember that as of today we have no realistic alternative to fossil fuels. It will take decades before technology related to renewables will make them competitive, even with CO2 tax. Carbon capture and storage technology for gas and coal is under development, but currently many challenges remain to be solved before it can be commercially implemented on a larger scale. Initial analyses show that CCS for gas is cheaper than for coal as there is less CO2 to be captured and stored.

This is why a no-regret climate-friendly energy policy should include:     

  • Enhanced energy savings and energy efficiency
  • Increased use of gas in all market segments with a focus on replacing coal in the power sector
  • Phase-in of renewables like wind and solar
  • Development of the carbon capture and storage technology.

These policy objectives offer both a robust and cost-effective strategy for reducing green-house gases.         

- Vladimir Akramovsky




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Oil of Russia, No. 4, 2011
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