Total Exec Betting on Slight Growth in Demand
Europe is only part of a global market, something that, in fact, does not really exist, according to Philippe Sauquet, President, Total Gas & Power, who explained there were several different regional gas markets with very different parameters and features to delegates at the European Gas Conference in Vienna, Austria.
Mr. Sauquet showed the supply-demand compound annual growth rate until 2030 for North America (1.8%), Europe (1.3%) and Asia (4%). While regions like Asia and North America had growing gas demand, he said he was still betting on the slight growth of gas demand in Europe, with LNG the fastest growing segment.
The connection between these markets was important, he said. “The connection is LNG and the evolution that we see for it in the future, we are planning for an increase in LNG in the longer term.”
His slide depicted the fact that most of LNG demand came from “traditional Asia” - Japan, South Korea and Taiwan; “other Asia” made up most of the growth in the future.
Meanwhile, a huge triangle remained in a graph of LNG supply, showing that breakeven of potential projects to fill that area required prices of $12-14Mbtu.
Then, he showed a range of LNG project breakeven levels, from Papua New Guinea ($9/Mmbtu) to Australia CBM ($16/Mmbtu), commenting, “US LNG might be a real game changer and will maybe contribute. Other projects like East Africa and Northern Australia (FLNG) need to have higher prices than are on the market to justify them.”
In terms of price, he showed Henry Hub (the lowest, around $4), NBP (between $10-12) and GNL Asia (near $16 but curving downward to near $12 by 2020).
Regarding the situation of gas today, he remarked, “You could think that we are in a tricky world where gas was insured and we can relax and just wait for the customers to ask us for supply. Surely the situation today is critical: we have discussed the possibility of flat economic development in Europe, and are seeing the decrease of gas market share in the power mix.”
The industry had had a responsibility to know what was going on and to ask the question, he stated, “Is gas competitive?” His answer was "no."
According to Mr. Sauquet, when one compared a variety of energy sources – gas, nuclear, coal, offshore wind, solar PV, onshore wind – nuclear might be cheaper. He asked, “How can we compete on a full cost basis?”
Among those, his presentation showed that the fossil fuel options had CO2 costs (gas' much lower than coal's), while the renewables required similar back-up generation costs. Onshore wind was the only renewable power generation source in the same low range as nuclear, CCGT and coal, while solar PV and offshore wind cost nearly twice as much.
He noted that coal was still “clearly competitive, a cheap fuel,” but said he still remained optimistic.
One real constraint, according to him, was climate change. The Emissions Trading System, he said, was designed to achieve EU climate goals via either replacing coal via gas or building new capacity; the latter option was no longer necessary, he said. However, countering any thought that TOTAL might be anti renewables, he said the company had invested in them, but subsidies could not be justified.
By stopping all measures other than the ETS, suggested Mr. Sauquet, the 2020 CO2 goals could be reached, raising gas demand and resulting in savings to the tune of USD 40-90 billion in Europe.