• Natural Gas News

    Meeting Energy Demand: A Humanitarian Imperative

    old

Summary

Affordable gas from shale not only kick-started the US economy, it also triggered a major shift away from coal, says ExxonMobil's Rob Franklin.

by: Drew S. Leifheit

Posted in:

, Shale Gas , Liquefied Natural Gas (LNG), Top Stories, , News By Country, Russia, United States

Meeting Energy Demand: A Humanitarian Imperative

Over the next 25 years the world's population is set to grow from 7 billion to 9 billion, global GDP will more than double, and rising incomes in developing nations will lift billions of people into the energy-consuming middle class for the first time, according to Rob Franklin, President, Gas & Power, ExxonMobil, who set the scene for what he wanted to address at the World Gas Conference in Paris, France.

Such progress, he said, will bring new developments for energy and electricity.

“Meeting this demand is more than a business objective – it is a humanitarian imperative,” he stated, adding that one in seven people around the world have no access to electricity at all, while even more lack modern cooking fuels.

Mr. Franklin said that the question facing natural gas defines the industry today: “How can we meet the world's vast and growing need for energy, whilst also taking meaningful and timely action to reduce the risk of climate change?”

Increasingly, he answered, natural gas answers both parts of the question, emitting 60% less emissions than coal, “and right now it is the only energy source that provides significant emissions reductions whilst also being abundant, affordable, versatile, trusted and rapidly deployable on a large scale.”

ExxonMobil, he said, sees global gas demand rising at more than 2%/year until 2025 – about twice the rate of oil; most of the growth, according to Mr. Franklin, will come from the Asia-Pacific region, where demand is set to double within a decade.

He offered, “We also expect gas to surpass coal as the world's second largest energy source as utilities and other power generators seek to reduce emissions by shifting from coal to gas.”

Power generation, he said, offers a tremendous opportunity for emissions reduction, as generation is the largest and fastest energy demand center, accounting for about 40% of global emissions. “By maximizing the switch from coal to gas in the power sector, we can make meaningful progress on emissions and air quality,” he explained, “and we can do it quickly and affordably without constraining economic growth.”

He pointed to what's been happening in the US as an illustration of this, with American GDP expanding by nearly 20% in the last 5 years, manufacturing rebounding, and unemployment dropping to 5.5%. He reported, “And yet, over those same 5 years, energy-related CO2 emissions have fallen more in the US than in any other country, at their lowest since 1994.”

Mr. Franklin attributed this growth and lowering of emissions to the growth of shale gas. “The abundance of affordable gas from shale not only kick-started the US economy, it also triggered a major shift away from coal for power generation,” he noted.

Since 2008, he said, power generated from coal has decreased more than 20%, while natural gas has risen by nearly 20%.

“This transformation happened without mandates, cap and trade, or price components – it was largely the natural outcome of markets operating freely all along the value chain.”

He observed that this had not come at the expense of renewables. Wind and solar, he explained, have more than tripled since 2008.

Contrasting that approach with that of the EU's approach, which he admitted has been successful in reducing emissions, he said it is at the expense of economic growth and job creation.

Mr. Franklin added, “The good news is, the benefits of shale gas won't be confined to the US much longer, because the US is poised to become a significant exporter of LNG.”

According to a study by Carnegie Melon University, US LNG exports will help reduce global greenhouse gas emissions by enabling the displacement of coal in other parts of the world. He added that LNG also strengthens energy security by expanding the diversity of energy supplies.

“Similar benefits could be realized in Europe almost overnight,” remarked Mr. Franklin. “Indeed, unlike Asia Pacific, Europe already has in place the interconnected market and the advanced infrastructure to distribute and easily transport natural gas on a large scale at low cost.”

Ms. Robin Dunnigan, Deputy Assistant Secretary, Bureau of Energy Resources, U.S. Department of State, showed delegates a slide of the growth of US gas supply to 2040. Noting the low price of oil and decreasing rig counts in the US and the ramification for tight oil and gas, she says that US production is remaining the same.

“And what we're finding is, through innovative technologies, energy efficiencies and lowering costs, US companies are still producing at similar rates,” she reported, offering that recently production of oil was over 9.5 million barrels, the highest rate since 1983.

Gas production, she showed, is set to continue growing, almost 40% through 2040, when the US should be producing 1 TCM/day. “It's a lot of gas,” she quipped.

Gas, she explained, is one of the factors that has lowered carbon emissions in the US, as well as the increasing use of renewables, retirement of coal plants. Ms. Dunnigan showed the “good news story” that CO2 emissions from power generation are trending ever downward since 2012 and should through to 2040.

The US no longer importing natural gas, she said, is significant. A decade ago, she recalled, the US was poised to import around 108 BCM of gas. “Instead, in 2014, we imported 1 BCM of LNG,” she explained. There is a huge differential of 250 BCM, she pointed out, between the 2005 and 2015 export forecasts for the US.

“So just the fact that we're not importing what we were importing and the gas from Qatar, Trinidad and Tobago and other sources that was destined for the US is now headed to global markets – that's changed the energy picture of the globe,” said Ms. Dunnigan.

Regarding US LNG export policy, she said that all of the exporters and producers for the LNG coming online from the US in the next 5 years have received licenses or conditional licenses from the Department of Energy and from the Federal Energy Regulatory Commission to export to Free Trade Agreement (FTA) and non FTA countries.

“Over 150 BCM of gas has been approved for both FTA and non FTA countries, so probably not all of it will come online in 5 years, but let's say 100 BCM of it comes online. The first LNG will be exported at the end of this year,” she reported.

The abundance of LNG exports from America, she said, could go to Europe, Asia, the Caribbean. She commented, “Those decisions will be made commercially, but the bottom line is, they can go wherever the market allows them to go, because the licenses have been approved.”

In relation to the “trilemma” of energy security, climate goals and economic competitiveness and their intersection she called a “critical challenge” in the 21st century.

“From a security perspective, one of the most important aspects, from our perspective, is diversity of supply, fuel type and routes,” she said, offering that the US has an “all of the above” strategy regarding this. “Diversity makes sense,” she added.

Ms. Dunnigan presented a map of Europe that showed thick purple arrows for inflows of pipeline gas, most notably from Russia and Norway, slender blue arrows depicting LNG inflows from places like Qatar and Nigeria, as well as dots indicating existing and planned LNG terminals on European shores.

“Those big arrows from Norway and Russia aren't going away,” she said. “Europe will continue to benefit from affordable pipeline gas from those places, and they should – but it should also be able to benefit from all of the LNG that's coming on the market, and to do that when those LNG terminals begin to import gas it needs to be able to move in Europe to any consumer in any country, including the Balkans and Energy Community countries like Ukraine and Moldova.”

The US, she said, strongly supports the Energy Union strategy and will work hand-in-hand with the EU, supporting it through diplomatic engagement. “That means helping countries build interconnectors; getting terminals in places where there aren't LNG terminals where it might be helpful; getting policies in place that might facilitate the free flow of gas within Europe.”

While there's room for both pipeline and LNG gas, Ms. Dunnigan opined that this must all come together in a free market that lets it move around.

The next speaker, Alexander Medvedev, Deputy Chairman of Gazprom’s Management Committee, observed that Russia had been a reliable supplier. “For almost 50 years, our country secures uninterrupted supplies of natural gas with European clients.”

Supplies for Europe, he said, had totalled 4.2 TCM, contributing to the reduction of CO2 emissions by 1.7 billion tons less than coal for producing the same amount of energy.

He commented, “The current political turbulence has provoked an unreasonably negative attitude toward gas, including gas sourced from Russia. Instead of having a 'Golden Age of Gas', now natural gas is bad; Russian natural gas is awful. Some politicians even demand to rid Europe from dependence on Russian gas.”

Russian gas, he said, makes up one-third of Europe's consumption. Mr. Medvedev asked what the critical level of dependence to be able to sleep well. Russia, he said, had helped Europe reduce its consumption of oil.

Today, he noted a distressing tendency that gas power stations in Europe are being put on standby and investments in new gas projects are frozen. “This adversely affects not only the gas industry, but the environment, too,” he said, offering that increasing renewables and reducing emissions simultaneously can only be done by introducing more natural gas.

-Drew Leifheit