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CERAWeek 2022: Profile of natural gas rises as energy and decarbonization solution

10 March 2022 Kevin Adler

The twin crises of the current energy market tightness and the urgent need to reduce carbon emissions have raised the profile of natural gas higher than ever before, said panelists with a wide spectrum of interests at CERAWeek 2022 by S&P Global in Houston.

Stabilizing natural gas markets—raising production and distributing it efficiently by pipeline and as LNG—will strengthen economies in wealthier nations, raise living standards in developing countries, and help the globe achieve climate goals for 2030 and 2050, they said.

"We believe natural gas has a critical role to play in the energy transition," said Giulia Chierchia, bp executive vice president strategy, sustainability and ventures.

bp has investments in gas production, LNG and trading, and last year it sent its first delivery of a carbon-neutral LNG cargo to Taiwan.

LNG deliveries aimed at Europe to offset the loss of Russian pipeline gas are an example of the flexibility of flows, Chierchia said.

US Department of Energy (DOE) Secretary Jennifer Granholm relayed the same message about the importance of LNG to major markets right now. "We're serious about decarbonizing while providing reliable energy that doesn't depend on foreign adversaries," she said.

"We are utterly blessed with incredible resources … and want to make sure we are helping Europe," Granholm continued. "We have to be a partner in supply … Clearly, LNG is a big part of this equation, it's huge."

EQT, the largest natural gas producer in the US, announced its new "Unleashing US LNG Plan" at CERAWeek. It said the US can expand its gas production by 45 billion cubic feet per day (Bcf/d) by 2030, compared to nearly 100 Bcf/d currently. And it says this will help the LNG export business grow to 40 Bcf/d by 2030 and 50 Bcf/d by 2040.

This is not only an economic benefit to the US, but it's a key step towards reducing global emissions, said Toby Rice, EQT's CEO. Replacing the global coal-fired power with US LNG could cut global carbon emissions by 1.5 billion metric tons (mt) per year by 2030.

"[This] has the environmental impact that's equivalent to electrifying every vehicle in the United States ... the equivalent of putting solar on the rooftops of every American home ... and the equivalent of doubling US wind capacity—combined," he said.

EQT's vision is a quantum leap from the current US LNG production capacity of about 12 Bcf/d. Granholm said DOE projects that by the end of 2024, US LNG producers will have in service 16 Bcf/d of gas liquefaction capacity.

Cheniere Energy, which produces about 50% of the LNG in the US, will do its part to raise US prospects. This week, Cheniere announced hiring Bechtel to build 10 million mt/year more liquefaction capacity at its Corpus Christi, Texas, facility. This $7-billion commitment will bring the company's investment to $47 billion and 55 million mt/year of production.

Reflective of demand for LNG, Cheniere CEO Jack Fusco said at CERAWeek that all of the company's volumes from existing units was sold out through to the 2040s.

Long-term growth

Gas demand growth will be strongest in China and southern Asia, said Adnan Zainal Abidin, CEO of the Petronas Gas Business. For now, he expressed concerned that "prices are so high they could undercut growth," but hoped this would encourage more investment in gas production and the LNG value chain.

Events of the last year, when spot LNG prices spiked, showed the benefits of long-term contracts, said Fatema Al Nuaimi, CEO of ADNOC LNG, Abu Dhabi National Oil Company's LNG arm. For producers, more contracts would facilitate the financing needed to expand production, she said.

Europe's future with gas was hard to predict, Al Nuaimi said. While it's clear that EU nations wanted to diversify away from Russian pipeline gas and LNG, the EU this week also announced a goal to cut natural gas use by 30% by 2030, which could reverberate across global markets. Meanwhile, she said that current high prices "could push economies back to coal" for a short period of time.

Chevron CEO Mike Wirth said the gas market was suffering with "distortions" today, but he was confident those would be overcome. "There's still enough oil and gas," Wirth said. "But we're not necessarily seeing buyers and sellers matching up as well as they did … I'm not seeing signs of physical shortages."

Low carbon future

Ultimately, the low carbon content of natural gas will drive the move away from coal, said bp's Chierchia. Citing India as an example, Chierchia said that if the country stopped building new coal-fired power today and met its future power generation needs with natural gas, it would avoid about 2 billion mt of GHG emissions annually. This is in comparison to India's 2020 total GHG emissions of 2.4 billion mt, according to the International Energy Agency. bp is aiming to provide 15% of India's gas needs by the end of 2022, Chierchia added.

Natural gas is criticized for being a fossil fuel—that is, emitting carbon—but International Gas Union President Joe Kang pointed out there was more to the story. "Gas has an emissions effect. But it also has a pollution effect," he said. For nations that are dependent on coal-fired power or other dirty sources of energy, natural gas immediately improved lives by reducing air pollution, especially in their large cities, he said.

Bangladesh's positive experience with natural gas was a good example, added Steven Kobos, president and CEO of Excelerate Energy, which provides floating LNG systems. Seeing the benefits of LNG imports, Bangladesh rewrote its five-year energy plan "to cut out all coal power," he said. In Argentina, LNG imports were displacing diesel fuel.

Leaders of African nations who spoke at CERAWeek 2022 made a similar point. Both January Makamba, energy minister of Tanzania, and Matthew Opoku Prempeh, energy minister of Ghana, said that their top goal was to use natural gas and LPG to replace charcoal for home cooking. This would save tens of thousands of lives lost each year to airborne pollutants, they said.

"Our number one priority is that energy consumed by most people should be easily accessible and cleaner," said Makamba.

For Tanzania, natural gas could be transformative to the economy as well, he said. By 31 May, Makamba said the country hoped to announce a final agreement with a consortium of international oil companies to invest $30 billion in natural gas production, liquefaction, and export. The LNG project, which has been under discussion for eight years, would both provide gas for Tanzania and also fuel investment for economic development and energy access throughout the country, he said.

For Egypt as well, gas is both a source of economic growth and a domestic clean fuel, said Egypt's Minister of Mineral and Petroleum Resources Tarek El Molla. Natural gas today accounted for about 65% of the country's hydrocarbon use, and it could reach 100% by 2055, he said.

Egypt's plans for natural gas included extensive use of CNG for vehicles, as well as gas-fired power that will support home use, industry, and electric vehicles, El Molla said.

"We are accelerating … the resource we have, which is natural gas," he said.

Posted 10 March 2022 by Kevin Adler, Chief Editor

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.


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