When the International Energy Agency introduced the idea of a golden age of gas several years ago, many thought it was a given. Fast forward to today, and this golden age is far from guaranteed.
What’s changed? In essence, the debate over the future energy system has intensified. There are more and stronger voices – across government, business and society – arguing in favour of using other sources of energy in place of gas. And in some cases, pragmatism is being usurped by idealism.
Renewable sources of energy will be critical in meeting growing energy demand while addressing climate change. But they alone will not be enough to support the living standards of everyone on the planet. Gas will still be needed in power generation, both in its own right and to support intermittent renewables. In addition, as high temperatures and dense energy storage are needed to produce essential materials such as iron and steel, renewables will struggle to replace oil and gas on a practical scale.
Oil and gas will, therefore, continue to play a core role for decades to come in industry and construction, in transport, in petrochemicals, and much more besides. They are essential components of the future energy mix: partners, not alternatives, to renewables.
This message needs to be heard. The prosperity and wellbeing of the planet are at stake. It’s up to the gas industry to speak with one voice – loudly, clearly and often. The industry also needs other, independent voices advocating the benefits of gas.
Governments typically have three major priorities when setting energy policies: security of supply, economic competitiveness and a reduction of greenhouse gas emissions. At present, only gas can meet all three priorities simultaneously. This puts Russia, home to the largest gas reserves in the world, at the heart of the debate.
When it comes to energy security, Russia has demonstrated it is a reliable supplier. Looking at Europe, for example, Russia exported gas throughout the Cold War. In more than 17,500 days, there have only been 14 days when gas did not reach Europe. That’s almost half a century of energy security.
Russia is moving forward with several projects to increase gas supplies. Nordstream 2, the proposed expansion of the pipeline capacity from Russia to Germany, will bolster energy security in Europe. It will deliver enough energy to supply more than 26 million homes.
Meanwhile, an extension of Sakhalin 2 – one of the world’s largest integrated, export-oriented oil and gas projects – with a third train would ensure that the reliable supply of energy continues from Russia to countries throughout Asia. Other new projects are also critical. This is why Shell has partnered with Gazprom on a potential LNG project in the Ust-Luga port on the Baltic Sea.
Future additional supply from Russia will have an important economic advantage for many countries because it boosts competition among suppliers, which will lead to lower costs for gas. That’s good news for governments and citizens.
The industry must also do everything in its power to keep the cost of gas competitive with other energy sources. This will involve all companies, from drilling contractors to equipment suppliers, working together in partnership. It requires calling out bureaucracy and making suggestions on how a piece of work can be done more efficiently.
Shell and Gazprom, for example, use a special technology to increase the efficiency of the LNG plant on Sakhalin Island. This technology takes advantage of the subarctic temperatures to help cool natural gas for liquefaction. It reduces the amount of natural gas needed to run its gas turbines, while the waste heat generated in the liquefaction process is used as heat for the gas treatment process. Such ingenuity boosts the economic competitiveness of projects.
As well as aiding security of supply and economic competitiveness, natural gas has a vital role to play in reducing emissions. Following the UN climate summit in Paris late last year, governments are now considering the best mix of energy sources to meet their agreed targets to reduce emissions of greenhouse gases.
Using gas instead of coal produces half the carbon dioxide (CO2) and just one-tenth of the air pollutants when burnt to produce electricity. In addition, gas is abundant and – on top of pipeline transportation – can be cooled to liquid for shipping to countries in need of energy, and converted to make fuels and other products. In short, gas should feature significantly in the policies of any government.
This point needs to be made at every opportunity. It was one of the topics discussed at the St Petersburg International Economic Forum earlier this month. It must be raised again in the months ahead. Voices from Russia are vital. It’s the second largest oil and gas producer in the world.
We can still experience a golden age of gas. But to make it a reality, the gas industry must engage more prominently in the debate over the future global energy system. And it must demonstrate through major projects – from Sakhalin-2 to Nordstream 2 – that gas is the answer for countries looking for secure, competitive and sustainable supply.
This article was first published in the Russian magazine Oil and Gas Vertical in July 2016.