The global natural gas trade is set to more than double over the next 20 years to around 900 billion cubic meters (Bcm) from 400, about as much in trade by 2040 as the combined consumption of the United States and Canada today, the BP plc chief said recently.
Speaking at the 19th International Conference & Exhibition on Liquefied Natural Gas (LNG) in Shanghai, industry experts said rising LNG supply and demand is injecting enthusiasm into the market.
With the rapid growth comes rewards and caution, BP plc CEO Bob Dudley said at the triennial LNG event. The industry has to make sure that LNG is not only efficient but is able to make the case that gas contributes to lower emissions, he told the audience.
For example, China, which has been working to reduce its coal consumption and improve air quality, now has more than 20 gas import terminals. Gas demand continues to rise there and elsewhere.
“The planet is not on a sustainable path right now and growing the LNG trade can help to correct that,” Dudley said. “On the current path, energy demand globally is set to rise by about a third over the next two decades. At the same time, greenhouse gas emissions need to fall dramatically.”
Major reductions are needed “well before 2050,” he said, to align with carbon dioxide emission reduction goals set forth in the United Nations climate accord, aka Paris agreement, reached in late 2015 by nearly 200 countries. In the second half of the century, there needs to be “net zero emissions,” the BP chief told the audience.
“That’s the dual challenge: more energy with fewer emissions. It’s the defining challenge for the industry, and if you see the energy world through the prism of the dual challenge, as I do, then you must see gas as vital to the solution.”
Increasing the use of gas into power generation and partnering with renewables has helped bring emissions down in the United States to where they were about 30 years ago, Dudley said. “The UK has gone back to the 1890s levels of emissions. Given the scale of energy demand in the East, the potential is even bigger here. In fact, the biggest single step the world can take to get on a sustainable path is to help Asia replace some other forms of energy with natural gas for electric power.”
China’s LNG imports are up more than 40% year/year, but gas remains only a fraction of electric generation at around 3% versus 20% in Europe, Dudley told the audience.
“It’s a similar story in hard-to-abate areas like the steel and cement,” Dudley said. “So the opportunity for gas is huge.”
However, a significant investment in infrastructure is needed as China’s energy system still is built around coal. “It’s a lot to ask of a country with abundant domestic resources to become more dependent on imports. That requires a lot of trust in global trade flows.”
BP’s economics team recently researched the impact on global trade flows if tensions were to escalate between the United States and China. It could “heighten concerns” about energy security, causing countries to import less oil and gas and turn more to domestic resources.
“This could have profound implications for countries like China where imported natural gas has supported a massive program of replacing coal for heating in buildings and industry.” Coal-to-gas switching “has been a key part of China’s environmental policies, leading to significant improvements in local air quality.”
However, there has to be “confidence in the security of future gas supply,” the BP chief said. “That, to me, is a strong argument for working together to address concerns, thereby alleviating tensions and allowing cleaner energy to flow freely...The consequences of not doing so are more than economic, they are environmental.”
BP, long the No. 1 natural gas marketer in North America, has expanded its LNG capacity around the world. In addition to increasing capacity in the Atlantic Basin in Trinidad and Tobago, BP has LNG prospects in Australia’s Northwest Shelf, and three trains are planned at the Tangguh project in Indonesia. BP also has offtake agreements with some of the Gulf Coast proposals, as well as a prospective export project in Mozambique with Eni SpA.
As important as gas is in comparison to other fossil fuels, reducing methane emissions could make it even better, Dudley said.
“In time, our aim should be for the sustainability of gas to bear comparison with renewables.” Several producers, including BP, are targeting those reductions now. Even as gas production has increased, BP in the past year has fallen under its emissions target of 0.2%.
For the world to exceed a goal of the Paris agreement for net zero carbon emissions in the second half of the century, “we need to go beyond minimizing emissions and start taking the carbon out of hydrocarbons” by deploying carbon capture use and storage.
Australian-based Woodside Petroleum Ltd. CEO Peter Coleman, whose firm is one of the leading LNG providers in the world, said operators could further reduce emissions by upgrading their facilities.
“I think the big thing for the industry is we are still designing plants that don’t rely on renewable power,” Coleman said. “I’m really looking for that first LNG plant in the world that has a mixture of high efficiency natural gas, battery and renewables” to power the facility.
In addition to stakes in LNG projects in Australia, Woodside is partnering with Chevron Canada Ltd. on a prospective LNG export project in British Columbia, KM LNG. The partners recently requested a 40-year authorization to export up to 2.7 Bcf/d. Woodside also is helping to advance Gulf Coast export endeavors.
Implementing best available technology could reduce emissions from many LNG export projects, Coleman said. More reductions could be made combining with renewable technologies and batteries.
He told the audience the industry has to demonstrate how LNG fits in with a low carbon world.
“This is not just about ensuring we secure markets,” the Woodside chief said. “It’s about ensuring we are seen as being a significant contributor to reducing greenhouse gas emissions...Unless we act now, we run the risk of losing relevance.
“And once we lose relevance, we lose investors. We lose access to the people who we might want to recruit to work for us, if they don’t believe in what we are doing.”
Total SA CEO Patrick Pouyanne told the audience most of the rising demand for gas is going to come from the “fast-growing economies whose energy systems still rely heavily on coal, such as China, India and other Asian countries.”
China is predicted to account for about one-third of global gas demand from 2017-2023, as it reduces coal use, according to the International Energy Agency. Last year, Chinese gas consumption grew almost 18% year/year to 280.3 Bcm. China also imported 90.39 million metric tons (mmt) of gas last year, a year/year growth of 32% and up from a 27% increase in 2017.
Total is second only to Royal Dutch Shell as a private LNG player after purchasing Engie’s portfolio, which included a 16.6% stake in Sempra Energy’s Cameron LNG export facility. Total also has a huge stake in Tellurian Inc.’s planned Driftwood LNG export project, with plans to purchase gas from the Louisiana project once it is in operation.
In addition, the French major is planning to build a network of LNG bunker hubs to support the growing shipping market, Pouyanne told the Shanghai audience.
“The LNG bunkering market, which might be limited today, could have a bright prospect,” he said. LNG bunkering demand could be as high as 20 mmt by 2030, according to Total estimates.
In late 2017, Total partnered with French shipping giant CMA CGM to supply around 300,000 metric tons/year of LNG for 10 years beginning in 2020. The LNG bunker is to fuel nine newbuild container ships, scheduled for delivery beginning next year.
The partners also have a cooperation agreement to examine the most environmentally responsible propulsion solutions to meet the International Maritime Organization’s 2020 implementation date for sulfur regulations.
Under the agreement, Total is considering chartering on long-term basis a LNG bunkering vessel that would not only deliver fuel to CMA CGM in Europe but to other customers in the same region. The new supply chains created would lead to a wider use of LNG, especially in other shipping sectors.
In addition, Total is promoting the use of LNG in power generation using floating storage regasification units in other gas-thirsty countries.
To ensure its growth and sustainability, the LNG industry has to address not only cost concerns but the environmental challenges, including reducing methane emissions, Pouyanne said.
To attract new customers, “we must not forget that LNG needs to be affordable and competitive, which means controlling costs,” the Total chief told the audience.
“We have fierce competition from other energy, in particular coal or fuel oil. Natural gas will succeed in the future global energy mix if cost of infrastructure and logistics can be reduced.”