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Are hopes of a golden age of gas over?

Posted by on 22 July 2016
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In many quarters, gas is viewed as a 'bridge' to a low carbon future, in which a combination of renewable energy and perhaps nuclear, play a major role in reducing greenhouse gas emissions and containing temperature rises. Some see the requirement for the bridging phase towards renewables to be unrealistically quick, whilst others see little scope for gas without carbon capture and storage in the medium term.

In 2015 globally, natural gas accounted for 23.8 per cent of primary energy consumption and with proven natural gas reserves of 186.9tcm, enough to meet 52.8 years of current production, it is not surprising that major energy companies continue with their current business strategies of fossil fuel exploration and production. Indeed, energy companies, including BP argue that, for a combination of geopolitical and economic development reasons, gas power is likely to continue to play an important role in the short-to-medium term future, especially in economies seeking secure, affordable and reliable electricity for heating, cooling and perhaps transport.

In Europe, domestic gas output is in decline as the North Sea’s gas fields reach the end of their life. In 2015, EU gas production fell sharply (-9.8%) to its lowest level since 1971. Despite an increase in European gas consumption of some 4% to 426.3bn m3 (reports Eurogaz) in 2015, consumption has not yet recovered to its pre-2008 levels and is currently restrained by the availability of cheap imported coal and competition from renewable energy. In the future, rising demand for gas will be met by improvements in gas pipeline capacity from Russia, Central Asia, North Africa and the Eastern Mediterranean. In addition, LNG imports will play a more important role, facilitated by opening LNG import terminals, improvements in the Europe’s pipeline network and rise of new suppliers seeking customers. Thanks to America’s shale gas revolution, cheap American LNG is likely to play a growing role, at the expense of traditionally high priced gas from Russia’s Gazprom.


Vladimir Debentsov: The changing face of EU & Russian gas 

Vladimir Debentsov: The changing face of EU & Russian gas


However, as Europe’s coal power plants are phased out, natural gas will play a complementary role to renewables for, in the absence of renewable energy storage, gas is better able to accommodate fluctuations in demand for power and variations in temperatures that can spike demand for heating and cooling.

For gas-rich countries in Africa, gas will be used to boost electricity supplies, increase access to electricity and to earn foreign exchange. For example, in Egypt, Mozambique and Tanzania gas could become an important new base load supplier of power. In South Africa, the planned independent gas power plants are destined to provide peak power when supply from renewables or coal prove insufficient. With little domestic natural gas production, the plants will initially rely on imported LNG, most probably from Cheniere Energy’s Sabine Pass LNG Terminal in America, followed in the 2020s by deliveries from northern Mozambique.

Hopes of a golden age of gas may be disappointed, but the likelihood is that its abundance cannot be ignored by gas-rich countries nor by those seeking industrialisation and access to cheap electricity.


Nick Butler: The bleak picture of the global gas industry 

Nick Butler_Flame Conference

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