LNG essential for the North Asian energy transition
BY
Global Voice of Gas
THE INTERNATIONAL GAS UNION
Small-scale LNG for energy access
Argentina and Brazil seek to get more value from their gas
US LNG can tackle emissions in Europe and Asia by replacing coal
Message from the President
Dear readers,
Welcome to the second issue of the Global Voice of Gas for 2024.
Over the last few months, we have seen major global events impacting the gas industry, the escalation of conflict in the Red Sea, the Middle East and the continuation of the Russia-Ukraine war contributing further to global uncertainty. This uncertainty is being exacerbated by political events in the EU, with the European elections illustrating a swing towards the right, potentially impacting policy changes within the region.
Despite all these challenges, we are happy to see the industry’s thriving has not been stopped. China’s accumulated apparent consumption from January to May 2024 has seen more than a 10% year-on-year increment. Qatar and Malaysia, leading LNG players and producers, are expanding their liquefaction capacity to meet the growing demand around the globe. Canada’s first LNG terminal is ready to deliver its first cargo of LNG in the near future. While gas remains a key contributor to solving clean cooking challenges in Africa, Asia, Latin America and empowering social economic development.
This year, IGU’s International Gas Research Conference 2024, held in Banff, Canada in May, continued its tradition of focusing on technical research, gas clean-tech, technology start-ups, featuring technical sessions through the week focusing on various topics from CCUS & hydrogen storage, data analytics to LNG and pipeline safety. However, we were thrilled to broaden the conference scope in 2024, focusing on global innovation within the entire gas value chain. The gas industry has been at the forefront of technological innovation since its inception and now we aim to expand on our history of innovation to provide new solutions within the
spheres of social, security and affordability. This was done through an impressive strategic agenda with global leaders coming together to produce informative and deep discussions into topics such as innovation and the culture of energy, innovation with regional perspectives, evolving gas systems and the role of innovation within security and affordability.
We thank our IGRC2024 hosts, the Canadian Gas Association, for the impressive conference and look forward to developing these discussions through their next phase at IGRC2027 in Hungary. Looking ahead, it is crucial for our industry to maintain focus on our global responsibility. Gas remains a vital component of the global energy mix, through coupling with widely deployed wind turbines and solar PV. This partnership provides the cleanest way to address the electricity fluctuations in many developed economies, safeguarding our way to achieve our climate ambition. This is being made possible through technological innovation, such as the development and deployment of small-scale LNG (ssLNG) which is proving fruitful in Brazil, Nigeria and India and it is financing innovations such as these that highlights the positive results from the utilisation of gas, empowering us to continue with our mission to achieve a secure, sustainable and affordable future energy system.
Our editors prepared an excellent issue on the role of gas in solving for the energy trilemma, and I hope you find it insightful and enjoyable.
Li Yalan, IGU President
FEATURES
Editors’ Note
Welcome to the 16th issue of the Global Voice of Gas magazine, an International Gas Union publication, produced in collaboration with Natural Gas World (NGW).
This issue explores several wide-ranging components of the energy trilemma, the muchdiscussed balancing of energy sustainability, affordability and security, which combined with the need for innovation within the industry, was a focus of the IGU’s recent International Gas Research Conference 2024 (IGRC2024) held in Banff in mid-May.
Over three days, IGRC2024, with the theme Fuelling the Innovation Agenda, presented nine plenary sessions for more than 500 delegates from over 30 countries.
Our regional reports in this issue shed light on the current gas agenda in the North and South American regions. The issue further includes a feature on how the two largest natural gas markets in South America, Argentina and Brazil, are pursuing policies to maximise the economic and social benefits their respective gas sectors, including enhancing affordability, security and sustainability.
Reflecting on the environmental issues facing global energy, this issue offers a review of how US LNG can tackle emissions in Europe and Asia by replacing coal used for power generation. In a recent report using bottom-up emissions measurements methodologies, the Berkley Research Group estimated that coal supply chains for European and Asian power generation produce more than twice the CO2 emissions compared to US LNG.
In the same vein, Dr. Graeme Bethune, chairman of EnergyQuest and adjunct professor at the Centre for Gas and Energy Transition Research at the University of Queensland in Australia, checks in with a commentary on the role of LNG in helping Japan, Korea and Chinese Taipei to reach 2030 emissions reduction targets.
We also look at the state of LNG bunkering and LNG’s value as a low-carbon fuel for the shipping industry, with more than a third of the current orderbook for newbuild vessels targeting the use of LNG as fuel. We also examine an incredibly important benefit of small-scale LNG providing access to clean energy in areas that are far removed from centralised power grids.
Meanwhile in Europe, we look at how recent EU elections have drawn attention to the EU Green Deal.
In the UK, we look at the role of natural gas in the overall power market.
In this issue we also take a deep dive recap of the IGU’s recent Wholesale Gas Price Survey report, which highlights cooling global natural gas prices.
We hope you enjoy this issue and find it useful and informative.
Tatiana Khanberg, Strategic Communications and Membership Director, IGU
WGC2025: Shaping the Future of Energy Sustainability
The 29th World Gas Conference (WGC2025) is set to redefine the global gas and energy landscape in Beijing, China on 19-23 May 2025. Under the theme “Energising a Sustainable Future,” WGC2025 aims to address the current challenges and facilitate developments toward a cleaner, more sustainable energy ecosystem.
We recently celebrated the one-year countdown event, where WGC2025 announced a remarkable lineup of speakers, featuring industry leaders including Dai Houliang from China National Petroleum Corporation and PetroChina, H.E. Saad Sherida Al-Kaabi of the State of Qatar and QatarEnergy, Li Yalan of the IGU, Fu Chengyu of China International Council for Promotion of Multinational Corporations, Michael Lewis of Uniper, Sun Xiansheng of the International Society for Energy Transition Studies (ISETS), Andrea Stegher of SNAM and the IGU and others.
The WGC2025 programme includes Plenary, Current Debate, Industry Insight, and Technology & Innovation
RODNEY COX Director of Events, International Gas Union
Centre sessions, covering diverse topics such as sustainable future energy, global energy policy, LNG’s future, global gas development, financial realities, technological innovation and more.
The conference extends an invitation to industry experts and emerging speakers to submit an abstract before 30 September 2024, for consideration to join the distinguished list of speakers in the Industry Insights and Technology & Innovation Centre sessions.
Additionally, WGC2025 offers ample networking opportunities and spotlight cutting-edge technologies driving the transition to sustainable energy and we hope to see your there in 2025.
As the world strives to decarbonise and embrace renewable energy, WGC2025 is a must-attend conference and exhibition, uniting industry leaders and experts to discuss and shape the future of sustainable energy. For more information, visit www.wgc2025.com
Caption: IGU President Li Yalan (centre) and Secretary General Menelaos Ydreos (fifth from left) joined industry experts at the one-year countdown event and IGU Gas Industry’s Development Forum on 21-22 May 2024, at the China National Convention Center Phase 2, discussing gas and energy amidst climate change, energy transition, and global investment perspectives
North America
TIM EGAN CEO, Canadian Gas Association IGU Regional Coordinator
Canada recently hosted IGU’s triannual International Gas Research Conference 2024 (IGRC2024), in Banff, Alberta. The theme of the conference, Fuelling the Innovation Agenda, was developed to highlight the impact of innovation on furthering energy security and showcasing its positive impacts on societies. The conference expanded beyond the historic technical focus to also include gas clean-tech, technology startups and social innovations.
With over 500 delegates from more than 30 countries, the conference truly was a global showcase of innovations, sparking significant dialogue and collaboration. IGRC2024, for the first time, also provided a platform for voices that are seldom heard in technical conferences. Entrepreneurs, energy experts and industry leaders highlighted the crucial and positive impact of the work done by the researchers and academics present at the conference. The panels and speakers from all regions of the world spoke about a range of issues – like energy poverty – that are the motivators for the kind of innovative work our industry does.
An example was Magatte Wade, an entrepreneur from Senegal, who shared her personal journey of growing up without access to affordable, reliable, and acceptable energy. Her experience as a young adult, when she moved to Europe and gained access to energy security, highlighted the transformative power of this key factor in people’s well-
being. Her story underscored the urgent need for access to gas energy in many regions of the world, making the issue more relatable and compelling.
Another example was a panel with Indigenous leaders in Canada who showcased transformative business models in which Indigenous communities are owners and partners in LNG projects, giving them an opportunity for real economic reconciliation.
The event also included Global Spotlight Sessions featuring panelists from different regions who discussed the varied levels of energy poverty and insecurity they are facing and celebrated the delegates on their work on ensuring that affordable, reliable energy remains acceptable so that it can be accessed by nations and people whose lives – their health, wellbeing and economic opportunities – can be transformed.
The discussion also highlighted a key area where innovation needs to happen – the policy and regulatory framework so gas energy can deliver energy security today and into the future.
IGRC was a great opportunity for many in the North American industry to profile how the gas industry – and the innovation it is pursuing – delivers positive results for society.
The North American IGU members are next focusing their attention on preparations for a North American Natural Gas Summit later this year in Mexico, building on a 2023 event in Canada and anticipating a 2025 event in the US.
Latin America
CARLOS CORTES SIMON
Executive Chairman at Asociacion De Empresas De Gas Natural and IGU Regional Coordinator
ARGENTINA: As for Vaca Muerta, 2024 could be a record-breaking year for investment, with data released by operating companies projecting $10bn in capital spending, or around 12.5% more than in 2023.
» Argentina’s energy sector is set to see critical changes in policy and regulation in the next few months, as new President Javier Milei, who took office in December, embarks on radical reforms aimed at lifting the country out of economic recession.
» A libertarian economist who surprised many pollsters with a landslide election win, Milei has vowed to deregulate the economy, cut public spending and scale back the state through privatisation, with reforms to the energy sector set to take centre stage. But his agenda, which initially faced tough opposition in Parliament, may succeed in July, considering the Omnibus Bill of Law’s approval by the House of Representatives in April and by the Senate (with certain amendments) in May. Now such amendments need to be confirmed by the House of Representatives, which is expected to occur soon.
» Vaca Muerta continues to offer opportunities to enhance business profitability, buoyed by signals of market liberalisation from the Milei administration. However, the government will have to demonstrate it can muster reforms. Now, all eyes are turned to the new political landscape after the “Pact of May”, a broad forward-looking shopping list to boost economic liberalisation failed completely, leading to the Chief of the Cabinet of Ministers’ resignation (He was replaced
by the former Minister of Home Affairs, Guillermo Francos, in late May).
Slashing subsidies
» Argentina is the largest gas market in South America, typically accounting for over half of its power generation and more than half of its overall primary energy supply. But the market’s proper functioning has been undermined by a longstanding system of subsidies, which has led to payment deferrals and defaults in the gas and power supply chains and disincentivised investment in production. These subsidy payments have also contributed to Argentina’s widening fiscal deficit.
» Natural gas producers sell their supply to the state power administrator CAMMESA, gas distributors and state-owned ENARSA, with part of the price they pay covered by the state, and the rest with payments from end users. However, payments from the state are frequently delayed, often taking up to three or four months.
» These cash flow problems are passed on to the producers, which have responded by focusing on oil development, where they can secure high international prices on the export market.
» Milei’s government is eliminating gas price subsidies, except for those provided for the lowest-income households. It issued a decree in December declaring a state of emergency in the energy sector, mandating a review of tariffs to align them with market prices.
» The new tariffs were announced in early April and only removed subsidies to high-income consumers. Energy Secretary Eduardo Rodriguez Chirillo said in January that only 17.5% of consumers were paying the $3.7/mnBtu cost of gas production, with the remaining 82.5% paying just $0.70.
» Low prices have left the energy sector highly disinvested, under-financed, inefficient, at risk of shortages and with a trade balance deficit of $30bn over the last 10 years.
Takeaway capacity
» Takeaway capacity improved with the launch of the 11mn m3/day President Nestor Kirchner Pipeline (PNKP) in August 2023. This has allowed Argentina to supply more gas to its central and northwest consumers, while reducing LNG and
diesel oil imports and increasing exports to Chile, improving the country’s trade balance.
» The government estimated in December 2023 that the PNKP launch would result in $4.2bn of savings in gas procurement in 2024. But some specialists disagree with that forecast, due to delays in completion of some of the compression plants in the province of Buenos Aires linked to the new gas pipeline from Neuquén. The pipeline is yet to meet its technical specifications, and the lack of necessary compression plants casts doubt on whether it will reach its planned capability on time, meaning LNG imports will still be needed next winter.
» Future plans to eventually expand capacity to 40mn m3/d have stalled. There have also been delays to a potential pipeline project to transport more gas within the north and then onwards to Bolivia and Brazil.
» External factors will be crucial in accelerating expansion and adjusting existing pipelines. The plan to reverse the Northern Gas Pipeline’s flow to boost gas sales to Brazil depends on Argentina’s ability to replace the declining Bolivian supply.
LNG and other investment projects
» Argentina’s ultimate ambition is to export Vaca Muerta’s gas internationally. Malaysia’s Petronas has begun building a floating LNG unit that could let another available vessel to be placed offshore by 2027 increasing LNG exports. The unit would have a capacity of 2 MTPA but Petronas is working on a much larger project with Argentina’s state-owned YPF to build two additional floating LNG units by 2029 and an onshore plant which could eventually export as much as 25 MTPA by 2030-2032.
» For development to go ahead though, Petronas and YPF are waiting for a proposed new promotional regime being discussed in Congress for major infrastructure projects. This is part of the Omnibus Bill that is about to be passed by Congress.
» Projects benefiting from the regime will enjoy a reduced income tax rate of 25% versus the standard 35%, among other tax breaks, as well as eased export, capital flows, dividend payments and other restrictions.
» As part of the Omnibus Bill, Congress is also set to approve an amendment to the Hydrocarbons Law, which would prevent the government from interfering with domestic prices for gas and petroleum, while cutting red tape for the development of midstream facilities and open up the possibility of developing underground gas storage.
COLUMBIA: The profile of natural gas in Colombia is an example of success in energy independence, improving the quality of life, and contributing to environmental sustainability. With a focus on expanding access to natural gas, sustainable mobility, and innovation in renewable energy, Colombia is positioned as a leader in the energy transition in the region.
» Colombia is a global gas destination committed to the energy transition and is very proud that 100% of the natural gas consumed by homes, businesses, vehicles, industries and thermal plants is produced nationally, and is an energy source that contributes significantly to the development of the national economy. This demonstrates the country’s energy autonomy in the natural gas sector.
» Although proven reserves decreased by 11% in 2022, Ecopetrol (state owned company) has revealed that offshore natural gas potential could reach between 70 and 100 TCF, supported by significant discoveries in various regions of the country. Among the main players in natural gas production in Colombia are Ecopetrol, Canacol Energy, Hocol, Lewis Energy and Frontera Energy, who have contributed with important discoveries in Córdoba, Atlántico, Sucre and Magdalena.
» Natural gas represents 23% of the national energy matrix, with the industrial sector leading consumption with 30%, followed by thermoelectric plants with 23% and residential consumption with 20%. In the last 25 years, the coverage of natural gas service in Colombia has expanded from 17% to 67%, benefiting 11.7 million homes, mainly with low income. This growth in natural gas penetration has been fundamental in improving the quality of life of millions of Colombians, allowing them to access more economical and efficient energy for various domestic needs.
» The development of the Natural Gas Vehicle (NGV) market
in Colombia has been significant, with more than 650,000 conversions of vehicles to CNG (compressed natural gas) carried out to date. This growth has been driven by the environmental and economic benefits of CNG, which offer savings of up to 50% in fuel costs for drivers. The CNG infrastructure in Colombia is robust, with more than 600 service stations and 113 conversion workshops.
» As for thermal districts, these generate significant savings in primary energy consumption and reduce greenhouse gas emissions. Notable projects include the La Alpujarra Thermal District in Medellín, the Serena del Mar project in Cartagena de Indias, and the Potenza Business Center Thermal District in Villavicencio.
» The Multidimensional Energy Poverty Index (IMPE), developed by Promigas, has identified that 9.7 million people in Colombia still cook with firewood or charcoal. The expansion of access to natural gas has improved the quality of life of more than 36 million Colombians, especially in lower income families, reducing dependence on polluting and expensive fuels, and freeing economic resources for other essential uses.
» Connecting more homes to the natural gas network is essential to improve the living conditions of vulnerable communities. This not only reduces energy poverty but also contributes to the environmental sustainability of the country. Collaboration between the gas industry and government is key to increasing natural gas sources and ensuring reliable and secure supply.
» Colombia has a high potential for the production of biogas and biomethane from residual biomass. The first biomethane plant is already in operation, benefiting 40,000 homes and avoiding the emission of 12,000 tons of CO2 per year. The country’s landfills also have significant potential to generate biomethane, which would benefit more than 1.5 million families. This diversification in renewable energy sources demonstrates Colombia’s commitment to sustainability and innovation in the energy sector.
» The natural gas industry in Colombia leads the development of green hydrogen projects. Ecopetrol and Promigas are implementing pioneering projects that inject hydrogen into natural gas networks, with more than 20 projects announced in various regions of the country for industrial and heavy
transportation applications. These projects not only position Colombia as a leader in the energy transition, but also open new opportunities for economic development and job creation in the country.
BRAZIL
» Natural gas supports security of energy supply in Brazil, given the country’s substantial use of intermittent renewables, primarily hydropower. In 2023, the country generated 93% of its power from renewable sources, as reservoir levels at hydroelectric dams were high, and as a result, natural gas power plants were not used for most of the year. However, in 2021 a severe drought meant hydropower reservoirs were at very low levels, yet Brazil did not have to resort to curtailing power supply or load shedding, as gas plants were put into operation.
» More recently, the heatwave caused by El Niño and climate change meant it was necessary to dispatch gas fired power plants in some regions to cope with high air conditioning load, highlighting the flexibility of natural gas.
» Currently only half of the gas that Brazil produces is available for the market, with the rest reinjected into wells, either to boost oil recovery or because of a lack of pipeline capacity. As a result of the shortage, domestic gas prices are typically on a par with prices for imported LNG. There has been no progress in bringing some of the 25bn m3/year of gas that is currently reinjected into oilfields offshore, to the market in southeast Brazil.
» Brazil’s government kicked off its Gas for Jobs program in March 2023, positioning natural gas as a driver for the country’s reindustrialisation by making the fuel more available and affordable for key sectors, particularly industry. But progress implementing the initiative has been slow. What’s more, left-wing President Ignacio Lula da Silva is looking to undo some of the previous steps taken to liberalise the natural gas market under his predecessor Jair Bolsonaro.
» The program involves various institutional and regulatory measures to give gas a greater role in spurring industrial activity. Where it can have a greater application in growing strategic sectors like steel, ceramics and petrochemicals, but currently, its use has been stunted by limited supply. The program aims to boost domestic supply, expand the
socioeconomic returns from gas development and integrate it more into the country’s energy transition strategy.
» One of the flagship policies of the Bolsonaro administration was reform at Brazil’s national oil and gas company Petrobras. Under an agreement with the competition authority CADE, the company liberalised the energy market through the divestment of assets in gas transportation, distribution and refining. The agreement also prevented Petrobras from acquiring gas supplies from other producers, in order to dominate the market. Among the largest divestments seen, Petrobras sold its northern and southeast pipeline systems, as well as its gas distribution holding Gaspetro.
» These divestments and further regulatory improvements created a new dynamic and new products offered by the private-owned transportation companies and gas traders. But the new government is seeking a U turn and has asked for a renegotiation of the agreement with CADE.
» The government has also faced criticism for political interference in Petrobras’ management decisions. Shares in the national oil company dropped by 10% in a single day in March after it opted against issuing extraordinary dividends, as approved by the majority of the board of directors, which were appointed by the government. It is alleged that the government wants to cut shareholder payouts so that more can be invested in refineries and renewables and possibly to buy back companies which were previously privatized by the former government.
» Reuters reported in November that Lula had asked Petrobras CEO Jean Paul Prates to adjust its 2024-28 investment plan to prioritise the creation of local jobs, by ordering more ships for offshore projects at Brazilian shipyards. After months of speculation, Prates was replaced on May 14 by Magda Chambriard, ex Petrobras and ex Director of the oil and gas regulator ANP.
» Another key policy development expected this year in Brazil, is a new bill establishing a national program for lowcarbon hydrogen and the creation of a steering committee to manage it. The bill was approved by Brazil’s Chamber of Representatives in November last year but is awaiting a second confirmation vote by the Senate.
CHILE
» Chile only produces around 15% of its gas needs domestically, with the rest either imported in the form of LNG via two regasification terminals in the country’s north and central regions or delivered via pipeline from Argentina. The latter has increased flows recently by easing internal bottlenecks and increasing takeaway capacity from the Vaca Muerta formation. The bigger Argentine flows have boosted Chile’s supply security, improving ability to meet seasonal demand, which has been good for prices, flexibility and diversification.
» Pipeline supplies and LNG from Argentina serve as Chile’s main source of backup energy and security of supply, replacing coal and diesel with a clean, available, competitive fuel, supported by a robust infrastructure that complements the variability of renewable resources. In addition, LNG bearing trucks from Chile’s regasification terminals provide natural gas to remote areas that cannot be reached by pipeline, improving domestic access to power.
» The firm, short-term gas contracts with Argentina in recent years have presented good levels of compliance, which is encouraging as it helps build confidence, and the markets seek to achieve longer-term contracts. However, gas consumption declined last year in Chile as a result of exceptionally high rainfall that increased the availability of hydropower,
» The country set a goal in 2021 of expanding renewable power generation to 80% of the total by 2030, while also eliminating coal completely by 2040. However, the current government led by President Gabriel Boric, who took office in March 2022, has yet to finalise a detailed plan for achieving the end of coal. The roadmap is expected to include an explicit position regarding the role of natural gas during the phasing out of coal-fired generation, in terms of cost-effectiveness, emissions reductions, security, sufficiency and resilience, and its complementary role in supporting variable renewable energy.
» Coal is one of main sources of power in Chile, accounting for 22.4% of generation in 2022, according to the International Energy Agency (IEA), while hydroelectricity contributed 23.2% and natural gas 19.6%. Solar, wind and biofuels accounted for 16.1%, 10.1% and 4.9% respectively that year.
» The recently approved Electricity Tariff Stabilization Law establishes a subsidy for over 1 million vulnerable households (approximately 3 million people), financed with US$120 million from a charge on high-energy consumption customers and
public treasury resources. Additionally, it creates a Territorial Generation Recognition Mechanism, reducing tariffs by 20 to 30% in municipalities with coal-fired power plants. The law also aims to gradually raise electricity tariffs that have been frozen for four years while mitigating projected increases, which could have reached up to 150%.
» The above measure, effective in the second half of 2024, complements previous tariff reductions that acknowledged local electricity generation, granting discounts based on their contribution to the National Electric System. Furthermore, a working group will be formed to evaluate additional funding sources and policies to reduce tariff increases for regulated customers.
» In early 2024, the Ministry of Energy unveiled the Green Hydrogen Action Plan for 2023-2030, reaffirming Chile’s commitment to achieving a carbon-neutral economy by 2050. At the same time, discussions between industry stakeholders and authorities continued regarding the broader decarbonization strategy. This strategy highlights the critical role of natural gas as a transitional energy source, facilitating the phase-out of coal while expanding renewable energy capacities. The gas industry continues to advocate for greater support, emphasising natural gas as a vital low-emission transitional fuel. The roadmap to phase out coal plants is currently being updated and could be presented to the industry in July 2025.
PERU
» This year Peru celebrates 20 years of production of one of the most representative gas fields in Peru. Camisea, the country’s most important natural gas reserve, is ten times larger than any other discovery in their territory and one of the most important in Latin America. Its proven and probable natural gas reserves amount to 7 TCF, with associated liquids of around 330 million barrels.
» PERUPETRO, the state company in charge of promoting hydrocarbon exploration and production, has been intensively promoting new areas for hydrocarbon exploration, both oil and gas, especially the latter, considering that it is the key fuel for energy transition.
» PERUPETRO identified 31 areas for oil and gas exploration in different basins, the most prospective areas for gas being those located in Ucayali Sur, Madre de Dios and Huallaga. In addition, the incorporation of 15 new exploration regions are being evaluated, in order to start promoting them to investors.
» The gas sector seeks to solve the delays in the granting of environmental permits, working hand in hand with the institutions responsible to comply with the established deadlines. At the same time, in the license contract, it has included a clause on the Social Development Fund to ensure direct resources for the development of the native communities in the areas of influence of the blocks under production.
» In relation to natural gas exports, during year 2023 to March 2024, 80 cargoes have been exported, mostly destined to Korea, Japan, United Kingdom and Canada.
» In other aspects of the industry, it is important to mention that the company Calidda (Gas Natural de Lima y Callao S.A.), has proposed to expand its project to reach 14 cities in the interior of the country and thus contribute to the long-awaited expanse of gas. The Peruvian company has the concession from the State for a term of 33 extendable years, to design, build and operate the natural gas distribution system in the department of Lima and the Constitutional Province of Callao.
SUMMARY
» The Argentina shale gas industry continues to evolve towards country sufficiency.
» A weak economy hampers infrastructure to export in Argentina.
» Domestic gas projects in Brazil and Argentina should replace Bolivia imports and partially LNG, post 2025.
» Colombia is a great example of gas utilization and market development. From thermal power, industrial purposes, cooking, cooling and vehicles powered with natural gas.
» LNG poised to continue for seasonal supply in the region.
» Market volatility remains in tandem with droughts or rainy periods.
» Latin America continues to have large idle regasification capacity in all countries
» Latina América as part of the global South is evolving its industry, protecting the environment and promoting sustainable energy.
IGRC2024 takes gas energy innovation global
The International Gas Union (IGU) broadened the scope of its triennial International Gas Research Conference (IGRC) to focus on global innovation in the gas energy sector at IGRC 2024 in Banff, Alberta
At the latest International Gas Research Conference (IGRC) held in May in Banff, Alberta, the International Gas Union (IGU) showcased the depth and breadth of innovation in gaseous energy, with a particular focus on reducing environmental impact.
Tim Egan, CEO of the Canadian Gas Association, which represents Canada as the Charter Member of the IGU, opened the three-day conference by highlighting the importance of innovation that is underway all along the natural gas value chain.
“We believe strongly that we in the gas industry have a great story to tell with innovation and how it is important to our industry now and in the future to produce, to transport and to distribute a critical source of energy to the world,” Egan said. “We want to celebrate the work of the many innovators here because what they do is ensure we can offer humanity around the world the affordable, the reliable and the acceptable source of energy that is natural gas, energy that permits hundreds of millions of
people to live their lives in dignity.”
The IGU President Madame Li Yalan, in her opening remarks, said that “Innovation is our pathway to overcome all difficulties and challenges”, adding that it has touched all aspects of the natural gas value chain, from production to distribution, from cooking and heating to power generation and transportation.
“Innovation driving the shale gas revolution has enabled the world-wide energy consumer to achieve energy independence,” she said.
Social Innovation
Technology innovation formed a significant portion of the agenda at IGRC 2024 – more than 500 delegates from more than 30 countries could choose from any of 20 concurrent technical sessions or more than 50 poster presentations covering virtually every aspect of the gas value chain.
But it was the social innovation agenda which captured
the greatest attention, beginning with a leadership dialogue between the Egan and Magatte Wade, an African-born entrepreneur and leader in the role of African entrepreneurship and innovation as a foundation for African prosperity.
“For Africa to fix its poverty problem it needs entrepreneurship which will be powered with economic freedom,” she said. “We need access to reliable, affordable and abundant energy sources, of which we all know by now that gas is the one that we have to rely on.”
Natural gas, Wade said, offers a path out of economic and energy poverty for African economies, but the industry “absolutely cannot” let others tell the story of gas, and as it is innovating on the technical side, the industry must also find new and innovate ways to ensure that natural gas is part of the bigger conversation around reducing emissions and solving the climate problem.
“Find innovative ways to communicate with the rest of the world. You really have to do that at this point right now. So don’t just think of innovation as what you’re currently doing. But think about it as how can your industry innovate around communication, and around telling a better story of gas.”
Innovation & Security
Technological, financial, and social innovations have underpinned energy infrastructure build-out in places like Europe, but in Africa, as Wade was quick to point out, progress has been slow in bringing modern energy to some of the poorest economies on the planet.
Emeka Ene, CEO of Nigeria’s Oildata Energy Group, an energy services company, said the key to advancing
energy aspirations in Africa is ensuring what he called “interconnectedness” in visualising future energy initiatives.
“It’s important that if you’re going to grow wealth, sustainably, over time, we have to have interconnectedness in the way we visualise things,” he said. “I think, to a large extent, when you try to prescribe to an aspiration, you are going against the very basis for open markets, for efficiencies, for competitiveness.”
As an example of this concept, Ene described an initiative he is leading that creates clusters of micro-grids fueled by local natural gas supply.
“Interconnect [those micro-grids] with someone who is doing the same thing, and slowly you are building out the infrastructure,” Ene said. “An LNG project could take 10 years, but a micro-grid, driven by natural gas from a flare, is able to come online in 12 to 15 months.”
While Africa and many other economies both in the Global South and in the developed world – have “insane” amounts of natural gas, Liberty Energy CEO Chris Wright, who moderated the Innovation & Security discussion, wondered aloud to Brenda Shaffer, senior fellow at Atlantic Council’s Global Energy Center, whether gas will continue to be the fastest growing energy source or whether political headwinds will come into play.
“A lot of it depends completely on the industry and how much self-confidence the industry has in telling the true stories of what they are doing for people all around the world and bringing prosperity,” Shaffer said.
In 2017 and 2018, she said, natural gas became allied with renewable energy to provide baseload generating capabilities to counter the intermittence of wind and solar.
DALE LUNAN
Tim Egan (left) and African entrepreneur Magatte Wade Chris Wright (right) with Brenda Shaffer and Emeka Ene
And switching from coal to natural gas – as the US did starting in 2005 – was seen as the cheapest, quickest way to lower greenhouse gas emissions and reduce air pollution generally.
Innovation & Affordability
Tilak Doshi, an economist and contributor to Forbes, moderated a panel examining how innovation could contribute to the affordability of energy, not only in the developed world – where affordability was brought into sharp focus with Russia’s invasion of Ukraine – but also in emerging and developing economies.
“Energy poverty is not just a matter for developing countries but it has also begun to attack Europe itself,” Doshi said. “Middle classes, working classes, pensioners are finding it increasingly difficult to afford heating their homes, driving their cars and there is also the impact of higher energy prices on inflation.”
Damjan Krnjević Mišković, Director for Policy Research and Analysis at the Institute for Development and Diplomacy at ADA University in Baku, Azerbaijan, said the affordability of energy will be brought into sharp focus at COP 29, which will be held in Baku in November, where the debate will focus on whether the developed world is prepared to pledge the trillions of dollars needed to enable the developing world to reduce its emissions.
Gas Energy at the Forefront of Social Innovation
In the West, the energy trilemma – energy security, energy
sustainability and energy affordability – is high on the agenda of indigenous communities, and in Canada, First Nations have identified LNG as a key component to bring economic reconciliation to indigenous communities, which includes raising living standards, reducing poverty and ensuring economic prosperity.
In a panel discussion titled Gas Energy at the Forefront of Social Innovation, Crystal Smith, chief councillor of BC’s Haisla Nation, on whose traditional territory the Shell-led LNG Canada consortium is building a 14 MTPA liquefaction and export facility, said her Nation had identified long ago the benefits energy developments could bring to her people.
“Our nation became involved in the energy sector simply because we were tired of waiting for something to happen for our people,” she said. “We were tired of managing poverty in our community. We had this vision that if you gave one of our members a job, meaningful employment opportunity, that it would change our community. It would change that not only our generation today, but future generations.”
“However, doing our due diligence and essentially receiving a mandate from our people, LNG was a commodity that our membership gave us their blessing to start exploring,” she said. “So, we’ve been in LNG and learning about it, educating our people about it for the last 15-20 years.”
The close collaboration with LNG Canada – and the negotiation of an agreement with the consortium for about 400 mmcf/day of capacity on the Coastal GasLink pipeline that will deliver feedgas to the terminal – allowed the Haisla Nation to take the next step in securing its economic future.
Haisla Nation is the majority owner, with a 50.1% interest, of Cedar LNG, a 3.3 MTPA floating LNG project that has won provincial and federal environmental approvals. Together with its partner, Alberta-based energy infrastructure company Pembina Pipeline, Cedar LNG – which carries a total cost of about US$4.0bn, including interest and transaction costs – reached a positive final investment decision (FID) on June 25.
Smith sits on the board of Cedar LNG as a representative of the Haisla Nation, and watching the project come to fruition has meant more to her than even LNG Canada’s FID in October 2018.
“It has been a journey,” Haisla Nation Chief Councillor Crystal Smith said in a video posted to the Cedar LNG website. “It’s the first project of its kind – indigenous-led, majority indigenous-owned, essentially trailblazing a path for economic independence.”
Innovation to Evolve Gas Systems
Previous energy transitions all involved switching from one fuel to another – whale oil, then coal and manufactured gas, then crude oil and natural gas.
However, the energy transition we are experiencing today is a transition that involves every aspect of every energy system, Paula Gant, CEO of GTI Energy, told IGU Secretary-General Mel Ydreos in a leadership dialogue focused on innovation to evolve gas systems.
“What is interesting about the transition that is currently underway is that we are transitioning every aspect of every energy system – how we make energy, how we move it, how we store it, how we use it, how we account for it – and those are all complex systems,” she said, noting that the shale gas revolution, while driven by hydraulic fracturing technology, also relied on innovations in super-computing and sensor technology.
Accessing that [shale gas] resource and making it widely available has changed human lives for the better,” Gant said. “That’s what innovation is about.”
When setting priorities for innovation, she said, the first question to be asked is Why? “Why are we doing this? Why are we evolving this system? Why are we seeking this transition, and will it benefit the people that we serve?”
Next, she said, is the how – how global energy systems can be evolved so they continue to deliver the quality of life the developed world has become accustomed to and, perhaps more importantly, how quality of life can be enhanced in the developing world.
“It is after we’ve answered the why and the how that we get to the what,” Gant said. “What are we going to do? What priorities are we going to set?”
The ongoing energy transition, she said, involves
three key focus areas: continued investment in lowcarbon molecules – “We’re going to need them well past our lifetimes”; continued investments in infrastructure, particularly to repurpose what is already in place – “How are we going to make sure that we have the types of investment and R&D we need to use that long-term.”
“And the third is we really need to focus on turning CO2 to value if we’re really going to turn this challenge of CO2 emissions in the atmosphere on its ear,” Gant said.
Innovation & Environment
Turning the “challenge of CO2 emissions” on its ear will require innovation not only in technical aspects like carbon capture and storage but also innovation in balancing the energy trilemma, Michele Harradence, executive vice president of Canadian gas infrastructure company Enbridge and president of its gas distribution and storage arm said in opening a panel on Innovation & Environment.
For the last decade, she said, environmental concerns – particularly greenhouse gas emissions – have been top of mind in energy policy discussions. But those concerns are much broader than just emissions and include air quality and land and water use.
“And environmental concerns are just one part of what we like to refer to as the global energy trilemma,” Harradence said. “Jurisdictions across the globe are grappling with how to balance not just those environmental goals but balancing them with reliability and affordability. The right balance is rarely simple, and it varies widely by jurisdiction.”
Amir Foster, executive director of the Israeli Natural Gas Trade Association, told the panel - “Take Nigeria, they have a lot of resources, but they don’t have energy
Bjorn Lomborg
Tilak Doshi (left) with Damian Miskovic, Khaled Abubakr, Luz Stella Murgas and Khairulanwar Zakaria
security,” he said. “If you go to Japan, they don’t have resources, but they have full energy security.”
The difference in those two situations, he said, is infrastructure. Japan has the infrastructure to provide energy security; Nigeria – along with many other African economies – does not.
At the same time, infrastructure doesn’t ensure security, not if the price of energy climbs to exorbitant highs.
“So affordability is at the heart of energy security,” Foster said. “Innovation for me is to think how we can build infrastructure in a way that brings energy security, and if we want to have more energy security in the world we need a much more robust supply chain. If we have the supply chain that we have today, gas won’t be affordable. And if gas won’t be affordable there is no chance that we can reduce CO2 emissions at the pace we want.”
Laszlo Fritsch, CEO of Hungary’s MVM CEEnergy (formerly Hungarian Gas Trade), said Europe’s recent experiences highlight the tricky balance of affordability and security.
Even before Russia invaded Ukraine, Europe was “on the edge” of energy affordability, largely because it didn’t have the infrastructure – underground storage, pipelines, LNG terminals – required to ensure access to resources.
But since the war, Europe has acted quickly to bring some of that infrastructure into play, he said.
“What Europe did in the last couple of years is huge in terms of LNG infrastructure and this is a great example of innovation – what Europe did in the last couple of years.”
But pivoting to reliance on LNG, he said later, also has consequences, much like Europe’s reliance on Russian piped gas had consequences.
“In order to avoid these kinds of situations, diversity of sources, diversity of infrastructure, are important,” Fritsch said.
But none of it will work, both Fritsch and Harradence said, without effective policy that supports natural gas as a driver of innovation to address the climate issue.
“Let’s be honest,” Fritsch said. “The last couple of years we have driven ourselves into a situation, at least in Europe, where it’s almost awkward to talk about natural gas – you can only talk about renewable gas and hydrogen, and I think we have to change that.”
Harradence, who lives in Canada’s most populated province and whose gas distribution company serves more than 4mn homes and business, said the infrastructure available to Ontario consumers ensures gas will be available all the time, and at a reasonable cost.
But in the absence of good policy, even good infrastructure may not be enough.
Energy Innovation and the Citizen of Tomorrow
In the closing session of IGRC2024, Heather Exner-Pirot, director of the energy, natural resources and environment programme at the Macdonald-Laurier Institute, said people expect affordable energy, reliable energy and sustainable energy. And they expect more of it – 8bn people expect it so they can get off coal and wood, create artificial intelligence centres or electrify systems.
“So there is a lot of pressure on the gas industry to meet these demands,” she said. “At the same time, you need social licence to achieve that – you need to be able to build, you need to be able to innovate, you need to be able to implement and meet those demands.”
Andrea Stegher, incoming president of the IGU, said the gas industry has a “strong and brilliant future” but different perspectives on the future role of gas need to be reconciled.
“We need to reconcile them in order to gain social licence, to continue to innovate and to put that innovation in the ground,” he said. “As an industry, we have an imperative to communicate better why we are going to do things that are different and why we are serving the needs of the citizens of tomorrow.”
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Mel Ydreos (right) with Paula Gant
Natural gas –a multi-purpose energy solution
In recent years, the world has been navigating a period of incalculable complexity, with the convergence of several global crises and risks. It started with a pandemic that stagnated economies and reversed progress on many sustainable development targets. Soon after came the outbreak of war between Russia and Ukraine which triggered a continental scramble for energy and exacerbated pandemic-era cost-of-living concerns.
Concurrently, a threat that has constantly been relegated began to take centre stage, as climate change mitigation and adaptation started topping government agendas across the world.
The result of this convergence is that countries are embattled on three major fronts all at once –environmental, energy security and human development. Moreover, these are not discrete threats, but each reinforces the other. For example, energy insecurity can slow progress on clean energy targets, and climate disasters can set development efforts back.
For this reason, as the world tries to solve these challenging problems, multi-purpose solutions are needed, which can help tackle more than one threat simultaneously.
For the Caribbean region, micro and small-scale LNG projects can be an effective answer to the abovementioned challenges:
1. Firstly, they can support climate action. Even as the world transitions towards low-carbon energy, harnessing natural gas - the cleanest burning fossil fuel - is considered a low-hanging opportunity to reduce carbon output in the interim.
2. Secondly, there is a healthy market supply of LNG both within and outside the Americas. Strong supply and a short supply chain increase the availability of this energy source, and therefore strengthen energy security in consuming countries.
3. Thirdly, for several reasons – including fiscal disincentives to the use of carbon-heavy fuels - LNG can be a cheaper option than imported oil in the long term to satisfy regional energy demand. Cheaper energy can liberate capital for development projects and reduce the cost of living.
In short, natural gas (as LNG) can help combat climate change, boost energy security and liberate capital for development.
NGC has been exploring the feasibility of micro and small-scale LNG projects in the Caribbean for some years, because the company believes there are real and valuable opportunities in that space. Through different partnerships and agreements, the company is working assiduously to bring such projects to fruition, and potentially expand the use of LNG across the Caribbean.
This focus fits seamlessly within NGC’s Green Agenda and sustainability thrust. Micro and small-scale LNG solutions can enable the Caribbean region to meet its energy needs today in a more sustainable way than currently obtains. As a future-minded energy company, NGC and the wider NGC Group are actively investing in such solutions - which also include renewable energy projects and energy efficiency initiatives – to help guide the region through the energy transition.
Argentina and Brazil seek to get more value from their gas
Milei’s ambitious agenda has faced tough opposition from parliament, labour unions and parts of the general public, slowing down progress on some reforms and leading others to be cancelled.
South America’s largest two natural gas markets are both pursuing policies to maximise the economic and societal benefit of their reserves, but the challenges they face differ greatly, as do their approaches to solving them.
JOSEPH MURPHY
The governments of Argentina and Brazil have a goal in common: maximising the economic and societal benefits of their substantial natural gas reserves. But just as characteristics of South America’s two largest natural gas markets contrast greatly, their approaches to solving these challenges are just as varied.
Argentina’s libertarian president Javier Milei, in office since December, has embarked on radical economic reforms in an effort to lift the country out of recession. Reforms impacting the natural gas sector include the phasing out of gas price subsidies, increased investment incentives and streamlining the operations of state oil company YPF. There are two main aims. First, to create a better-functioning gas market that is not a financial burden on the state and encourages investment in supply.
Second, to capitalise on huge reserves at the Vaca Muerta formation by finally establishing LNG exports, which would be a major benefit to both the economy and
government finances.
In contrast, the administration of Brazil’s leftist leader Luiz Inacio Lula da Silva, who took power at the start of 2023, has launched a Gas for Jobs programme that aims to bring down gas prices to revive industry, with the success of the plan hinging on whether more gas produced offshore can be piped to land instead of being reinjected to boost recovery. At the same time, gas market liberalisation that began under his predecessor Jair Bolsonaro looks at risk of stalling, after national oil company Petrobras renegotiated a deal with Brazil’s competition regulator allowing it to retain more assets, including in a key pipeline that imports gas from Bolivia.
Argentina
In Argentina, natural gas accounts for around half of power generation and about a third of overall energy supply. The country’s gas consumption was around 45.8
bcm in 2023, surpassed by domestic production of 48.2 bcm. The country exports gas to Chile and Uruguay and is eyeing future deliveries to Brazil, while it imports gas from Bolivia and through LNG.
Milei’s ambitious agenda has faced tough opposition from parliament, labour unions and parts of the general public, slowing down progress on some reforms and leading others to be cancelled. One reform aims to cancel the country’s long-standing system of gas price subsidies, provided to two-thirds of consumers. This system has caused significant strain to public finances and undermined the market’s functioning, stifling investment in production, Tomas Lanardonne, energy lawyer and partner at Buenos Aires-based law firm MHR tells Global Voice of Gas
The system has also led to payment deferrals and defaults across the gas and power supply chains. Under the system, natural gas producers sell their supply to state power administrator CAMMESA and gas distributors, with part of the price they pay covered by the state, and the rest by end users. Payments from the state are typically delayed – sometimes as long as three-to-four months.
The situation is further exacerbated by weak demand as a result of the recession. The payment issues are passed on to producers, which have responded by prioritising oil development in order to secure high export prices, while leaving new gas projects on the shelf.
The government has vowed to end subsidies except for the lowest-income households, after issuing a decree in December that declared a state of emergency in the energy sector and mandated a review of tariffs to align them with market prices. But it has been reluctant to deregulate too quickly.
“The progress on subsidies has not been at the speed we were hoping, as the government has been trying to reduce inflation,” Lanardonne says. “The government has not yet passed on the full cost to end users. That is their goal but they are lagging behind.”
Argentina is currently working on removing bottlenecks and upgrading infrastructure to expand pipeline exports
to its neighbours, and with rising production, the government expects to end imports from Bolivia this October, followed by LNG imports.
Takeaway capacity from Vaca Muerta expanded last summer with the launch of the first 11 mcm per day of capacity at the President Nestor Kirchner Pipeline. This has allowed Argentina to supply more gas to its north, reducing LNG imports and boosting exports to Chile. However, future stages that would take capacity to an eventual 40 mcm per day have stalled because of a lack of financing.
Milei’s government is also pressing on with plans to reverse the flow of the Northern Gas Pipeline, which currently imports Bolivian gas, to instead pump Argentinian gas to Brazil.
But the ultimate prize is LNG exports from Vaca Muerta. Malaysia’s Petronas is involved in positioning a 2-MTPA floating LNG plant off Argentina that could export by 2027. Petronas has partnered with YPF on a potentially larger 25-MTPA onshore plant, with the latter’s CEO saying in March that a final investment decision (FID) could be taken next year.
However, the partners are waiting on the passage of a bill establishing greater tax and regulatory stability, and a promotional regime for major infrastructure projects. It is yet to be cleared by Congress. Projects under the promotional regime would gain from a reduced income tax rate of 25% versus the standard 35%, among other tax breaks, as well as eased export, capital and other restrictions.
Vaca Muerta’s gas would be very competitive on the global LNG market, according to Lanardonne, who estimates a breakeven price of only around $2.5 per mmBtu. But in order for Argentina to establish itself as an LNG exporter, the government should assist on the diplomatic front, helping to create opportunities in import markets.
Lastly are there planned reforms at YPF. Milei’s government had wanted to privatise the company, but scrapped this plan because of opposition in parliament.
IEDA GOMES, SENIOR VISITING RESEARCH FELLOW AT THE OXFORD INSTITUTE FOR ENERGY STUDIES
TOMAS LANARDONNE, ENERGY LAWYER AND PARTNER AT MHR
Now the intent is to divest the company’s smaller and more mature conventional fields, improving business efficiency and to raise funds for core developments at Vaca Muerta.
Domestically, there is potential for gas within the current energy mix, if there is further investment in infrastructure, enabling gas to phase out the remaining diesel-fired generation, Lanardonne says. More importantly, gas could serve as a backbone for expanding industries that are energy-intensive and/or reliant on gas as a feedstock, such as petrochemicals, fertilisers and mining.
Brazil
Natural gas has a less dominant place in the Brazilian energy mix, where the majority of electricity is produced from hydroelectric dams. But it still plays a key role in ensuring energy security by providing a reliable supplementary source of supply for a system highly dependent on intermittent renewables.
For example in 2023, Brazil generated 93% of its power from renewable sources, as reservoir levels at hydroelectric dams were high. But in 2021, a severe drought meant this share dropped to 83%, and the country avoided loadshedding by ramping up supply from its gas-fired power plants.
More recently, the heatwave resulting from El Niño and climate change meant it was necessary to dispatch gas-fired power in some regions to cope with high air conditioning load.
Brazil consumed 38.4 bcm of gas last year, and while producing close to 55 bcm. However, only around half of this was available for the domestic market, with the rest reinjected into oilfields, mostly offshore, either to boost oil recovery or because of a lack of takeaway capacity.
As a result, while the problem in Argentina is that gas prices are too low, in Brazil they are too high – typically on a par with rates for imported LNG. This inhibits a greater uptake of gas use in industry, whether for power supply or feedstock.
The Gas for Jobs programme, initiated by Lula’s government in March 2023, will involve various institutional and regulatory measures, providing gas a role in revitalising industry and creating jobs. But there have been delays in establishing what practical measures will actually be taken, Ieda Gomes, energy expert and a non-executive director of international companies in the energy and infrastructure sectors, tells GVG.
On the one hand, offshore producers harness gas for reinjection to boost oil exports, and they want guarantees that there will be sufficient demand among industry at a high enough price to justify investments in transportation capacity. On the other hand, industry wants to be sure
The Gas for Jobs programme, initiated by Lula’s government in March 2023, will involve various institutional and regulatory measures to give gas a role in revitalising industry and create jobs.
enough gas can be supplied at a low enough price to justify investments in new projects that will create the demand.
“It’s a bit of a chicken and egg problem,” Gomes says. Not only does Brazil need more domestic gas supply to support industry and its renewables-dominated power system, but also to offset falling deliveries from Bolivia. Otherwise, the country will be left increasingly exposed to volatile international LNG prices, she says.
In a less positive development, Lula’s government seems to have put a halt to further liberalisation of Brazil’s gas market. One of the flagsip policies of the Bolsonaro administration was to reform Brazil’s national oil and gas company Petrobras. Under an agreement with the competition authority CADE, the company liberalised the energy market by divesting assets in gas transportation, distribution and refining. The agreement also prevented Petrobras from acquiring gas supplies from other producers except under special circumstances, ending the company’s monopoly and allowing these other producers to sell directly to consumers. Among the divestments, Petrobras sold its northern and southeast pipeline systems, as well as its gas distribution holding Gaspetro.
The purpose of the reforms was to create a more competitive gas market that connects more producers and consumers, ensuring open access to transportation infrastructure to support this. Doing so, would encourage greater investment in the sector and lower prices.
As a result of government intervention, though, Petrobras has now renegotiated the deal with CADE, so it will not have to sell TBG, the operator of a gas pipeline that connects Bolivia and southern Brazil. It can also retain control over its five remaining oil refineries. Lula has consistently expressed his opposition to privatisation, and he believes that government control should be maintained over essential sectors including energy. As such, hopes of further gas market liberalisation under the current administration appear slim.
Empowering Southeast Asia’s Clean Energy Future, At A Moment’s Notice.
US LNG can tackle emissions in Europe and Asia by replacing coal
The report by Berkeley Research Group estimates that the GHG emissions intensity of coal supply chains are more than twice as high as US LNG for power generation in Europe and Asia.
JOSEPH MURPHY
CHRISTOPHER GONCALVES, MANAGING DIRECTOR AND CHAIR OF BRG’S ENERGY & CLIMATE PRACTICE
PAUL EVERINGHAM, CEO OF THE ASIA NATURAL GAS & ENERGY ASSOCIATION
“We employed a bottom-up methodology in which we aim to use actual emissions measurements for each of the supply chain segments of US LNG, coal and pipeline gas to the greatest extent possible.”
CHRISTOPHER GONCALVES, MANAGING DIRECTOR AND CHAIR OF BRG’S ENERGY & CLIMATE PRACTICE
Using US LNG in power generation has a significantly lower greenhouse gas (GHG) emissions intensity than combusting coal in key Asian and European markets, global consulting firm Berkeley Research Group (BRG) concluded in a report published in April.
The release of the study, started several years ago, comes after the Biden administration announced a pause on approvals for LNG exports to non-FTA countries at the start of this year, pending an update of the department of energy’s analysis of the GHG footprint of these supplies.
The last emissions studies were carried out in 2019 and concluded that producing power from US LNG in European and Asian markets would not increase GHG emissions on a lifecycle basis, and had the potential to cut emissions if that LNG replaced coal.
The approvals pause was criticised by the International Gas Union (IGU) and others in the natural gas industry for sending an “unsettling signal” to global energy markets, and harming both energy security and efforts to combat emissions.
Key findings
BRG’s report, Comparative GHG Footprint Analysis for European and Asian Supplies of US LNG, Pipeline Gas and Coal, provides an integrated analysis of methane and CO2 emissions across fuel supply chains for power generation in 13 European and Asian markets, employing bottom-up methodology making a comprehensive comparison of emissions intensity of different primary fuel sources, as well as continuously updated data from numerous sources.
The work contrasts with other recent studies, which depend only on aggregated emissions to reach general theoretical conclusion, BRG explains. The firm’s research is based on the most up to date publicly available data possible, generally from 2022, covering every segment of fuel supply chains.
What the study found was that the GHG emissions intensity of coal supply chains was more than twice as high as US LNG for power generation in Europe and Asia. With only a few exceptions, it found that emissions from imported pipeline gas in both regions were also higher.
Specifically, US LNG uptake in European power generation had an average GHG emissions intensity of 507 kg of CO2 equivalent per MWh, which was 53% lower than for coal and 8% lower than for the main sources of pipeline imports. In Asia, the emissions intensity for US LNG came to 543 kg of CO2 equivalent per MWh, or 53% less than coal and 63% less than pipeline imports.
Regarding how emissions intensity is split between different parts of the fuel supply chain, around 65% of the emissions intensity of US LNG in Europe and Asia related to power generation, 13-14% to upstream operations and 20-22% to the midstream segment, according to study. For coal, the vast majority of GHG emissions intensity was concentrated in the power sector, with shares of 86% and 83% respectively for Europe and Asia. Only 12-15% came from upstream and 2% from midstream operations. The study uses eight countries in Europe and five in Asia as a basis for its analysis, which together accounted for four-fifths of US LNG exports in 2022. These include France, the UK, Spain, the Netherlands, Turkey, Poland, Italy and Germany, and South Korea, Japan, India, Taiwan and China.
“Evaluating energy supply through the lens of GHG emissions intensity is a crucial first step toward the decarbonisation of energy systems,” said Christopher Goncalves, managing director and chair of BRG’s Energy & Climate practice. “Doing so, however, requires accurate, updated measurements of emissions across fuel supply chains for both CO2 and CH4, with CH4 increasingly important to track given its outsized climate impact. This report leverages detailed methodologies and the best available public data to deliver insights vital to the ongoing energy transition.”
Where other studies fall short
BRG noted that there are many other studies weighing up the environmental benefits of US LNG exports versus coal, some of which arrive at starkly different conclusions. There are several common reasons for this, Goncalves explains.
Some studies accounted only for CO2 and not methane emissions, whereas others factored in methane emissions,
The BRG research is extremely important and instructive for the energy landscape in Asia. What it tells us is that US LNG can offer a reliable energy source for nations in Asia, with a much lower emission footprint than the coal that is currently relied on throughout the region.
but with a global warming potential of 100 years (GWP100), rather than BRG’s use of a global warming potential of 20 years (GWP20). The GWP100 of methane is 29, meaning that one tonne causes the same amount of warming as 29 tonnes of CO2, whereas the GWP20 is 85.
“We use GWP20 as we consider it to be fit for purpose given the imperative of GHG redcutions over the next two decades,” Goncalves says.
By underestimating the importance of methane in overall GHG emissions intensity, GWP100 makes coal supply chains seem less intense, even when coal mines emit a lot of methane.
Goncalves also points to other studies’ use of outdated emissions factors for supply chain segments.
“Many studies are based on the use of emission factors for supply chain segments. In our study, we employed a bottom-up methodology in which we aim to use actual emissions measurements for each of the supply chain segments of US LNG, coal and pipeline gas to the greatest extent possible.”
“Where necessary to use emissions factors, we sought to use the most updated and robust information available,” he says.
Progress on the actual measurement of emissions has differed across various segments of gas supply chains, with publicly available data used for natural gas pipelines, LNG liquefaction and gasification, still limited to emissions factors in BRG’s study. Individual asset owners and operators are increasingly measuring and maintaining detailed data on emissions for each segment, Goncalves says, although these are not yet publicly reported or available.
He also notes a lack of measurement of significant methane emissions from coal mining.
“Methane emissions in coal mining are not consistently measured and/or reported with the same focus and rigor as upstream emissions of methane from oil and gas operations.”
These emissions depend primarily on mine characteristics and whether there are any methane capture and mitigation measures in place.
Asian implications
While the environmental benefits of US LNG exports versus coal are particularly relevant in Asia, home to four-fifths of the world’s coal-fired power generation and a region set to drive global LNG demand growth over the coming decades.
“The BRG research is extremely important and instructive for the energy landscape in Asia. What it tells us is that US LNG can offer a reliable energy source for nations in Asia, with a much lower emission footprint than the coal that is currently relied on throughout the region,”
Paul Everingham, CEO of the Asia Natural Gas & Energy Association (ANGEA), tells GVG
The timing of the report’s release is extremely important, he says, as the US government reconsiders the environmental criteria for assessing LNG export approvals.
Global LNG prices have eased considerably since the 2022 energy crisis spike, but remain elevated. And pricing is a key consideration for customers in Asia, particularly emerging nations that are looking to transition from coal to gas.
“One of the key lessons learned since Russia’s invasion of Ukraine has been that when gas becomes unavailable or unaffordable for emerging nations in Asia, and other parts of the world, they fall back on
inexpensive and plentiful coal,” Everingham says. “Use of coal was at an all-time high in 2023 and three out of every four tonnes were consumed in China, India and Southeast Asia.”
The next wave of LNG supply coming primarily from the US, Qatar, Canada and Australia will help temper prices during the rest of the decade, to Asia’s benefit.
“The real challenges around affordability and availability will come through the 2030s and the 2040s. Policy makers in Asia are making decisions right now about what their energy systems will look like decades in advance. They hope LNG can be a significant part of that but it’s difficult to plan confidently when there is uncertainty around future supply and pricing. The policy environment is looking slightly more favourable in Australia. But the US environment remains unclear.”
The uncertainty in US policy is being felt across the region, but Japan has been most prominent in raising concerns about the pause on approvals, given its heavy reliance on LNG imports. Countries like India, the Philippines, Thailand and Vietnam are also turning increasingly to LNG, to support growing power demand and work towards net zero.
“But the infrastructure they require will take many years and billions of dollars to build,” Everingham says. “How can decision makers in these countries make longterm energy decisions with the uncertainty that the export approvals pause has introduced?”
Though the pause in US approvals is under six months old, and could be lifted by early next year, he notes that there are already signs of waning appetite for investment in major LNG export projects in the country.
“If this results in delays to the advancement of planned and prospective US LNG export projects, you
Many studies are based on the use of emission factors for supply chain segments. In our study, we employed a bottom-up methodology in which we aim to use actual emissions measurements for each of the supply chain segments of US LNG, coal and pipeline gas to the greatest extent possible.
will likely see this reflected in similar delays to projects in Asia that would rely on that gas,” he explains. “Because of the scale of planning and investment required to establish LNG import facilities, there is always potential for ripple effects at the receiver end. With that in mind, the worstcase scenario is that we would see gas-to-power projects in Asia cancelled because of uncertainty about US LNG exports.”
If that happens, the result will likely be more entrenched use of coal, to the detriment of Asia’s climate objectives.
CHRISTOPHER GONCALVES, MANAGING DIRECTOR AND CHAIR OF BRG’S ENERGY & CLIMATE PRACTICE
Small-scale LNG for energy access
A lack of energy access often reflects a combination of challenging geography and a lack of sufficient demand density to underpin major infrastructural investments such as powerlines or gas pipelines. Small-scale LNG, however, has become more economical and mobile. It allows gas to reach destinations well beyond traditional grid limits, improving energy access and removing a key barrier to social and economic development.
ROSS MCCRACKEN
Developing countries frequently struggle to connect gas and electricity grids to remote, mountainous, sparsely populated areas and struggle more so in fully archipelagic countries, such as Indonesia or the Philippines. Here the costs of infrastructure investment are too high relative to demand, leaving certain regions with very limited energy access and creating major barriers for social and economic development.
However, the development of small-scale LNG (ssLNG) is providing a new option for increasing energy access. Scaled down liquefaction technology has allowed the development of stranded gas fields, or liquefaction of flare gas, while improvements in ssLNG transportation allow its effective distribution. As a result, small-scale LNG is able both to support independent value chains and piggy-back off sunk investments in major LNG plants or import facilities.
Small-scale LNG transport now fully intermodal
LNG’s volume is about 600 times smaller than natural
gas in its normal state, which means a lot of energy can be shipped even in small parcels. A 20-foot LNG ISO container carries 22,000 litres of LNG at a working pressure of 17 bar, which is the equivalent of 137,500 kWh for higher heating value LNG. It’s a small package when set against an LNG Carrier, but one which carries a significant energy punch. A 40-ft ISO container carries 33 tons of LNG and is typically transported aboard regular cargo ships.
Trucks with insulated tanks and ISO container transports are now standard. ISO containers can be easily loaded to and from ships, trucks and rail cars, a development which has allowed the creation of virtual pipelines, providing a steady and reliable supply of LNG to end-users. Small LNG ships with capacity under 30,000 m3 can move LNG to minor ports or those with shallow waters, where, in conjunction with small-scale storage facilities, they create distribution hubs for onward transport.
Small-scale LNG presents major opportunities for an increasing number of businesses and communities, a
lifeline in terms of reliable, low carbon energy provision.
Roraima state, Brazil
Located in the northernmost part of Brazil, adjacent to Venezuela, the state of Roraima has a population of over 600,000 (2022). However, the Brazilian gas pipeline network stops well short of the state to the south, and its capital, Boa Vista, is not yet connected to Brazil’s main electricity grid, SIN.
The state faces some unique challenges such as the huge population growth as a result of neighbouring Venezuela’s economic crisis. While concurrently, has lost a key source of electricity supply, when power provision along the Guri/Macagua transmission line from Venezuela was interrupted in 2018. Despite the subsequent reactivation of the Jatapu Small Hydroelectric Power Plant, the state has a long history of power blackouts. The result being a heavy dependence on expensive, highcarbon diesel generation across 86 isolated electricity systems.
Development of a small-scale LNG virtual pipeline has improved the reliability of electricity supply, creating significant opportunities for regional development. As part of the Azulão-Juguatirica industrial complex, Brazilian company Eneva produces and treats gas at the Azulão field in Amazonas state before liquifying the gas and transporting it by truck via a 1,100 km road corridor to Juguatirica.
There, LNG-to-power plants provide electricity for more than half of Romaira state. In addition to providing a reliable energy supply, Eneva estimates its ssLNG pipeline results in a reduction of 178,700 tons of CO2/yr and 99% of the nitrogen oxide emissions produced by the former use of diesel generators.
Nigeria goes small on LNG
Sub-Saharan Africa’s gas infrastructure is predominantly export orientated; domestic gas and power networks are under-developed and energy access rates are amongst the lowest in the world.
Nigeria has been a significant exporter of LNG since the start-up of Nigeria LNG in 1999, but its internal gas distribution network remains limited, and the reliability and reach of its electricity grid is low. While oil and gas pipelines have also faced enduring security problems as a result of sabotage and theft.
Consequently, the use of oil-fired generators is extensive, despite high costs and emissions. Minister of Power Adebayo Adelabu estimated in December that while the national grid relies on about 3.5-4.5 GW of power generation capacity for a population of more than 200 million, there is about 40 GW of gasoline and diesel
generation used privately for baseload generation. As a result, companies are investing in small-scale LNG chains based on ample domestic gas reserves to provide a reliable supply of LNG to businesses across the country, reducing both energy bills and emissions, while making a significant contribution to regional economic development.
Local ssLNG pioneer, Greenville LNG, for example, installs cryogenic storage tanks, vaporisers, flow meters and other accessories on site alongside containerised control rooms linked to the company’s LNG production facilities, allowing it to ensure timely fuel deliveries. Customers, typically large industrial consumers, include BUA Cement and the Lekki Freezone power plant in Lagos state.
In October, the company opened the first L-CNG fuelling station in Kaduna State, which receives and stores LNG before transforming it into CNG for use in vehicles. Greenville LNG aims to establish 25 L-CNG stations across the country, taking advantage of a government push to increase CNG vehicle use following the removal of fuel subsidies for gasoline and diesel last year, which led to pump prices rising by more than 200%. In February, the company announced an agreement to establish an LNG hub in Enugu state at Ugwa Onyeama, extending the reach of its ssLNG network.
India pushes ssLNG as a component of gas expansion plans
India is currently expanding its national gas pipeline grid by over 14,000 km and developing gas use in a multitude of city gas distribution (CGD) areas. However, pipeline construction is a slow process, which has held back progress in boosting the country’s use of gas from just over 6% of primary energy consumption in 2016 to a target of 15% by 2030 to combat a heavy dependence on coal. India’s gas use as a share of primary energy in 2022 was in fact lower than in 2016 at 5.7%, though this was due to high global gas prices, exacerbated by the Russia –Ukraine conflict.
Small-scale LNG has been identified as a means of getting gas to areas as yet unserved by the country’s pipeline network and of developing smaller domestic gas resources.
In April, the Indian Gas Exchange launched contracts for ssLNG to address gas demand from industry and designated CGD areas unconnected to pipelines. The contracts allow users to buy LNG supplied by truck from the Dahej and Hazira LNG terminals and are expected to be extended later to other regasification terminals, as well as the recently inaugurated ssLNG in-land station at Vijaipur.
Credit: Government of Brazil
The Vijaipur ssLNG station is the first of its kind in India and was commissioned in March by operator GAIL India with production capacity of 36 tons/day LNG. The liquified fuel will be transported by tanker to neighbouring CGD networks in what could prove to be a model for further ssLNG development in the country.
Maritime ssLNG
The US has taken a lead in creating maritime ssLNG virtual pipelines from the US Gulf Coast to Caribbean islands, including energy-poor Haiti, where, in 2020, less than half the population had access to electricity. However, Southeast Asian nations are also promoting ssLNG as a means of extending energy access to islands lacking transmission capacity for either power or gas. Indonesia has roughly 6,000 inhabited islands. Its archipelagic nature makes the expansion of both power and gas grids technically difficult and expensive. Unlike India or China (the home of most ssLNG capacity in Asia), Indonesia is an LNG producer and exporter, and is increasingly using its gas resources for domestic economic development, in particular to displace diesel and coalfired generation.
shortages in West Java and the government has plans to supply LNG to small, distributed gas-fired generation plants across the archipelago, particularly in eastern Indonesia.
its first LNG cargo, has quickly taken up the possibility of extending gas deliveries beyond the large gas-fired power plants which serve the Luzon grid. The country’s energy department approved the first ssLNG import terminal project in early 2023.
Sub-Saharan Africa and Asia, ssLNG is extending energy access beyond the confines of conventional power and gas grids. It is now sizeable as a segment of LNG demand its own right; global ssLNG capacity stood at about 38mn mt/yr in 2024, according to a recent report from market researchers GlobalData, and is expected to grow by 26% in the next four years.
generation – the principle means of extending energy access – and LNG adoption as a road and maritime transport fuel.
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Credit: Greenville LNG
LNG essential for the North Asian energy transition1
Failure to expand renewables output to reach 2030 emissions targets will mean more LNG and even coal imports are needed for longer.
Japan, Korea and Chinese Taipei are all struggling to meet their emission reduction targets as they work to decarbonise their energy systems. Failures to grow renewables in the power sector fast enough to meet end-of-decade emission targets has meant that there will inevitably be recourse to LNG and even coal imports at higher volumes for longer.
The three markets, all top ten LNG importers, have varied political approaches and energy circumstances. However, major commonalities exist in the strategic challenge to decarbonise energy systems. In terms of renewables, the most obvious is that while some growth is evident in solar power, wind power growth has lagged behind targets badly. Nuclear restarts in Japan remain a vexed political topic after the Fukushima accident and therefore uncertain, while Chinese Taipei’s commitment to winding down nuclear by next year means more LNG as its growth in renewables falls short.
Setting aside the macro drivers for energy demand growth that will impact all supply sources, other things being equal LNG is likely to maintain a stronger profile in the energy mix than the IEA or even some government targets. Government reality checks on energy strategy
DR GRAEME BETHUNE
OIES SENIOR VISITING RESEARCH FELLOW, CHAIRMAN, ENER GYQUEST, ADJUNCT PROFESSOR, CENTRE FOR GAS AND ENERGY TRANSITION RESEARCH, UNIVERSITY OF QUEENSLAND
that may include relaxation of medium and long-term emissions targets would reinforce that expectation. Whatever their targets, it is clear that in all three markets, whether through infrastructure investment or the push to renew long-term contracts, preparations are underway to retain more LNG as part of the energy mix for longer, despite aggressive emissions targets.
Japan – LNG and coal needed to offset lags in renewables and nuclear restarts
As of 2022 Japan’s emissions from energy were down by 20.2% from 2013 but with a long way to go to reduce emissions by the target of 46% by 2030. Reducing emissions requires a significant change in the fuel mix for electricity generation. In Japan, 65% of electricity was generated from fossil fuels in 2022, 30% from coal, 31% from gas and 4% from oil. Renewables contributed 15%, hydro 7% and nuclear 5%.
Around two-thirds of the gas supply is used for electricity generation with the remainder evenly spread between industry, residential and commercial use. The outlook for gas in Japan depends particularly on gas use for generation.
1. A summary of Oxford Institute for Energy Studies Energy Insight 148, “The Role of LNG in the North Asian energy transition: lagging renewables means more LNG for longer?” https://www.oxfordenergy.org/publications/the-role-of-lng-in-the-north-asian-energy-transition-lagging-renewables-means-more-lng-for-longer/
As part of its commitment to net zero by 2050, Japan plans to reduce the LNG share of power generation to 20% and coal to 19% by 2030, to be largely replaced by increased renewables and nuclear. This would imply LNG imports dropping from 72 Mt in 2022 to 47 Mt by 2030.
Japan has made significant progress in solar. In 2020 Japan ranked 6th in the world among major nations in renewable energy generation capacity and 3rd in solar capacity2. However, there has been much less progress with wind, particularly offshore wind. Nuclear generation also needs to more than double by 2030 but in 2022 was down by 21% from its most recent peak in 2019.
Japanese renewables and nuclear are not growing fast enough to offset the proposed reduction in fossil fuels, with coal and/or gas needing to make up the generation gap. In terms of emissions, maintaining the role of LNG with CCS would be preferable to coal but to date, gas has lost out to coal, with higher emissions as a result. Since peaking in 2014, the use of both coal and gas for power generation has fallen but gas has been the biggest loser.
In 2021 gas use was 23.2% down from 2014 whereas coal use was down by 9.3%. Maintaining the role of LNG is likely to need a realistic carbon price or direct government action.
Korea – LNG likely to defy reduction targets amid renewables shortfall
Korea is planning to reduce its emissions by 40% below 2018 levels by 2030 but by 2022 emissions from energy were only down by 9.3%. In recent years there has been a reduction in coal use for power generation, with increases in gas and nuclear. Coal’s share of power generation has fallen from 45% in 2012 to 34% in 2022 while gas has increased significantly, from 21% to 29%. The share of nuclear has been steady over the same period. The share of renewables has increased from 2% to 8%.
Like Japan, Korea aims to achieve its emission reduction targets with renewable energy and nuclear increasing steeply while coal and LNG decline. The use of LNG for power generation is targeted to decline from 29 Mt in 2021 to 22 Mt in 2030 to 10 Mt in 2036.
Assuming LNG for other purposes remains constant, total LNG imports would decline from 47 Mt in 2022 to 38 Mt in 2030 and 26 Mt in 2036, the same as in 2007. The capacity of renewable energy in 2030 is expected to be 72.7 GW. This requires an additional 39.9 GW above existing capacity. Nuclear generation has been growing strongly in Korea (up by 21% between 2019 and 2022) and construction of two new nuclear reactors is resuming after being halted in 2017.
As in Japan, Korea’s plans to reduce emissions also
2. https://www.enecho.meti.go.jp/en/category/brochures/pdf/japan_energy_2022.pdf
3. https://gwec.net/globalwindreport2023/
rely heavily on growth in renewables. Solar capacity is growing relatively quickly at about 2 GW per annum. However, in 2022 solar only contributed 4.3% of total generation. There has been even less progress with wind. Onshore wind capacity at the end of 2022 was only 1,658 MW and offshore capacity was only 142 MW (i.e. 1.8 GW in total)3. Wind contributed less than 1% of total generation. The Korean government is targeting 34 GW of installed wind capacity by 2036.
Notwithstanding the targeted reduction in LNG, there is currently substantial investment underway and proposed in Korean LNG infrastructure, regasification terminals and storage. Korean LNG buyers have been active in securing new long-term LNG contracts. This suggests that companies believe Korean LNG imports will need to grow, not decline.
Chinese Taipei – LNG wins as nuclear winds down
Chinese Taipei is also committed to net zero by 2050 but is aiming to phase out nuclear by 2025 and increase the use of gas.
Coal-fired power generation accounted for 42% of its power mix in 2022, gas was 39%, renewables around 5%, nuclear 8% and the remainder was accounted for by other sources including hydro. By 2025, the share of coal to come down to 30%, gas has to reach 50%, renewables have to reach 15% and nuclear has to go to zero4. Chinese Taipei is proposing a higher share for LNG to offset the impact of the final nuclear phase-out. These emissions will also need to be abated. Increasing the gas share of power generation to 50% would require an additional 3 Mtpa of LNG imports.
As in Japan and Korea renewables are growing. Solar has been growing but as of 2022 had only achieved half of the 2025 target and less than one-third of the wind target. Achieving 50% gas-fired power generation in Chinese Taipei’s power mix by 2025 requires accelerated development of both gas-fired power plants and LNG receiving terminals, but projects have been bogged down by environmental delays.
Conclusion
Japan, Korea and Chinese Taipei all have ambitious targets to slash their greenhouse emissions by 2030. However, while there is progress with solar, the development of wind projects is lagging badly. While Korea is expanding nuclear, Japanese nuclear restarts are also lagging, while Chinese Taipei is phasing out nuclear generation altogether. This leaves coal and LNG as the only major options to make up for any generation shortfall, of which LNG is the lower emission alternative, playing a critical role in facilitating the energy transition.
4. https://www.moea.gov.tw/MNS/english/Policy/Policy.aspx?menu_id=32904&policy_ id=19
LNG rules the waves in low-carbon bunkering
LNG remains the top fuel choice for low-carbon shipping. Bunkering volumes are growing rapidly and LNG continues to dominate the vessel orderbook for alternative fuels.
JOSEPH MURPHY
LNG remains the fuel of choice for low-carbon shipping, thanks to its price competitive, abundant supply, welldeveloped infrastructure and potential to comply with increasingly stringent emissions regulation for years to come, experts tell Global Voice of Gas
Shipping is a hard-to-abate industry, as ships are expensive to build and can remain in service for decades, and retrofitting vessels to run on cleaner fuels can also be costly. In other words, the industry cannot quickly adapt to reduce its emissions, and carbon-rich fuel oil still dominates ship propulsion, as it has done since the 1960s.
The rise of LNG
Spurred on by increasingly strict rules governing shipping pollution, LNG has risen to prominence as a cleaner alternative, compared with oil-based marine fuels. LNG as fuel can deliver a greenhouse gas (GHG) reduction of up to 23% depending on what engine type is used, according to a 2021 study by US-based consultancy Sphera, while producing close to zero emissions of sulphur oxides, nitrogen oxides and particulate matter.
Currently LNG still accounts for a very modest share of energy use in shipping, but the global orderbook
for new vessels shows growing momentum behind its adoption. Out of the current global vessel orderbook, 36.2% of tonnage will be able to use LNG as a fuel, according to London-based maritime consultancy Clarksons. Uptake of alternative fuels in general continues to grow, now representing around half of the orderbook, versus only 34% at the start of 2022 and 11% at the start of 2017. Vessels capable of running on methanol account for 8.9% of the tonnage, while 2% are LPG and around 2.7% other alternative fuels, such as hydrogen, ethane, ammonia, biofuels and battery/hybrid propulsion.
“There is still uncertainty around fuel choice in shipping with pros and cons for each option,” Stephen Gordon, managing director at London-based Clarksons Research, tells GVG. “LNG remains the most popular option but there has been increases in methanol fuel orders over the past two years and an increase in ammonia interest over the past six to twelve months.”
More than 2,300 vessels worldwide are equipped to operate on LNG, with an additional 1,000 vessels on order, according to Oslo-based consultancy Rystad Energy. Notably, half of these operational vessels are LNG carriers that utilise boil-off gas as fuel, reducing their reliance on external LNG bunkering. Excluding LNG
carriers, though, LNG remains the most common choice for dual-fuel ships globally. The container segment is the most dominant segment for dual LNG, but car carriers have a very high share of their order book with dual LNG.
The LNG bunkering industry has its humble roots in Norway, and Europe remains the largest market, with 85 ports hosting LNG bunkering capabilities. However, the fuel has also established itself in Asia, with 26 ports offering the service, and has made inroads in North America, where there are 19 ports. Another five ports in South America can provide LNG bunkering, three in the Middle East, three in Africa and two in Australia, according to Rystad.
Unsurprisingly, its use has spread fastest in regions where there are stricter regulations on shipping pollution.
The volume of LNG that is bunkered has risen significantly in recent years (see figure 1), despite elevated LNG prices since late 2021. It reached 4.7 mcm in 2023, up from 2.9 mcm in the previous year, and is on track to set another record in 2024, with 3.1 mcm already bunkered year-to-date, according to Rystad.
Out-competing fuel oil on price and emissions
This upward trend should continue for at least the next two years, given LNG’s competitive price versus oilbased and alternative marine fuels, ample supply and the growing availability of bunkering infrastructure, Junlin Yu, Senior Analyst of Supply Chain at Rystad, tells GVG
In the EU, LNG also benefits from the Emissions Trading System (ETS). Until 2026, ETS only applies to tank-towake CO2 emissions, but after that it will apply to overall GHG emissions. But in either case, LNG comes out on top versus fuel oils (see figure 2).
Shipowners can still meet current IMO 2020 regulations and stick with fuel oil – either by opting for more costly low-sulphur fuel oil or investing in exhaust gas scrubbers. But not only does can this lead to higher emissions, but also higher costs (see figure 3). LNG has been cheaper than low-sulphur marine gas oil (LSMGO) over the last year, even though its price remains historically high. Its track record against very low sulphur fuel oil (VLSFO) and heavy fuel oil (HFO) has been more mixed during the same period. However, as of March, bunkering in Singapore saw the LNG FOB Japan price sit at only $383 per tonne of fuel oil equivalent, or 17.5% cheaper than HFO, 40% cheaper than VLSFO and less than half the price of LSMGO.
However, scrutiny remains over the issue of methane slip in LNG engines – that is, methane that passes through the engine without being combusted and escapes into the atmosphere. A lot depends on the engine type, according to Rystad. An LPDF four-stroke engine has a methane slip of 3.1%, whereas an LBSI engine has a rate of 2.6%, LPDF two-stroke Otto cycle a rate of 1.7% and HPDF twostroke diesel cycle a rate of 0.2%.
Rystad notes that as long as methane slip is kept under
Figure 1: Global LNG bunker volume by bunkering method (Million cbm)
Source: Rystad Energy Clean Shipping Solution
Scrutiny remains over the issue of methane slip in LNG engines – that is, methane that passes through the engine without being combusted and escapes into the atmosphere. A lot depends on the engine type.
0.61%, vessels can continue using LNG fuel until 2040 without incurring penalties under the EU’s FuelEU Maritime greenhouse-gas intensity target, which comes into force in 2025. Up until close to 2030, all LNG engine types can avoid penalties, falling to only two engines around 2035 and only the HPDF two-stroke diesel cycle as 2040 nears (see figure 3).
LNG and the other low-carbon options
As for the choice between LNG and other low-carbon options, some of the main challenges with alternatives such as low-carbon ammonia, hydrogen and methanol are uncertainty about future supply availability, costs and infrastructure.
Estimated fuel cost ranges based on the European Hydrogen Bank’s pilot auction also show that e-fuels can be ten times more expensive than LNG and oilbased marine fuels (see figure 4). “Without production
incentives, these costs are still extremely high,” Jo Friedmann, Vice President of Supply Chain Research at Rystad, says.
Meanwhile, adopting LNG today offers a pathway towards further decarbonisation for vessels in the future, as conventional LNG can be swapped for lower-carbon versions such as bio-LNG or synthetic LNG (e-LNG), using the same engines and infrastructure and partly the same supply chains, at no extra investment cost.
A 2022 study by the Maritime Energy and Sustainable Development Centre of Excellent at the Nanyang Technology University Singapore estimated that pure bioLNG could cover up to 3% of total demand for shipping fuels in 2030 and 13% in 2050, based on fuel availability, cost and logistics. Production of e-LNG would depend on how quickly renewable power generation is expanded, in order to produce the necessary green hydrogen, and this is a challenge for all e-fuels.
Figure 2: Greenhouse gas emission intensity by fuel and LNG engine type
Figure 4: Estimated fuel costs range based on the European Hydrogen Bank’s pilot auction
Figure 3: Minimum fugitive emissions rate to
FuelEU Maritime target
Source: Rystad Energy Clean Shipping Solution
IGU report shows cooling global gas prices
The global natural gas market continued to rebalance in 2023, with security remaining key in Europe and spot LNG a growing force
The highest prices were still found in Europe, as an ongoing reliance on LNG imports to replace Russian piped gas yielded an average price of $15.83/mn Btu. Prices in the Asia Pacific region averaged $11.56/mn Btu, down from just under $15/mn Btu in 2022, while prices in Asian markets averaged $9.16/mn Btu, down from about $10/ mn Btu in 2022.
Gas priced via gas-on-gas (GOG) competition models continued to escalate in 2023, the IGU report shows,
with the total volume of global GOG imports rising to an all-time high of 57%, while gas linked to oil prices (the Oil Price Escalation, or OPE, model) settled at 36% and the remaining 7% was priced through direct bilateral agreements (BIM) between large buyers and sellers.
GOG represents 84% of Europe’s pricing, with almost all domestic production, 82% of pipeline imports, and 84% of LNG imports priced in GOG. In 2005, only the UK had any significant levels of GOG.
OPE is still the largest category in most Asian countries, even in Malaysia, Vietnam and the Philippines, where it is mostly domestic production, and in India following the change in domestic pricing mechanisms away from linkage to international hub prices, in favour of oil linked pricing. In a large area of the world covering the Former Soviet Union, the Middle East and North Africa prices remain largely regulated.
Domestic production
Domestic production in 2023 accounted for about 3,037 billion cubic metres (bcm), or some 74% of total world consumption, the IGU price report says.
35% in 2005 to 47% in 2023,” the report says, although GOG’s share fell slightly from 2022 as India switched to OPE and away from hub pricing.
“Over the period as a whole, GOG in domestic production has gained share from the three regulated categories which in 2005 totalled some 52% compared to 38% in 2023,” the report says. “Half of this occurred in 2009 and 2010 when the GOG category increased in Russia at the expense of the regulated categories, as the market began to open up to independents more, and there was more effective competition between the independents and Gazprom for power sector and industrial customers.”
Pipeline imports
In 2023, about 13.5% of world gas consumption, or an estimated 559 bcm, came from pipeline imports, with pricing split between just GOG (62%), OPE (25%) and BIM (13%).
An estimated 47% of total domestic production, or about 1,439 bcm, is priced using GOG, with North America accounting for about 71% of that total, or about 1,021 bcm, the IGU report notes.
“The next largest share is in the Former Soviet Union, where the sales of gas in Russia to the large eligible customers by either Gazprom or the independent producers is classified as GOG, accounting for some 234 bcm.”
The balance of GOG priced gas is in Europe, primarily in the UK but also in the Netherlands and Romania, while Asia, Asia Pacific and Latin America have lesser proportions priced at GOG.
Oil-linked pricing, or OPE, accounted for about 11.5% of domestic production in 2023, or some 350 bcm, with fully two-thirds of that total – or 234 bcm – in Asia, mainly China, India and Pakistan. Asia Pacific accounted for 81 bcm, while the Middle East and Latin America accounted for 18 bcm and 13 bcm, respectively.
“The main changes in price formation over the 16 surveys have been the general rise in domestic GOG from
The GOG imports were predominantly European, at 348 bcm, followed by North America at 117 bcm and the Former Soviet Union at 9 bcm, which illustrates the Ukrainian imports from Europe. The top five European importing countries, all using GOG, were Germany, Italy, France, Netherlands and the UK.
“The main changes in the 16 surveys from 2005 to 2023 are the continued rise in GOG from 23% in 2005 to 62% in 2023, which has been at the expense of the OPE category,” the IGU report says, noting that overall pipeline imports fell sharply as Europe banned Russian imports in the wake of the invasion of Ukraine.
“This impacted GOG volumes more but this was offset by the change in Turkey (a switch away from OPE in its contracts with Gazprom) to leave OPE and GOG shares largely the same. In 2023, the GOG share fell back slightly, principally reflecting lower demand and lower
DALE LUNAN
Figure 1: Wholesale Price Levels by Region
Figure 2: World Price Formation 2023 –Domestic Production
Figure 3: World Price Formation 2023 –Pipeline Imports
pipe imports from Russia.”
GOG pricing accounted for 82% of European pipeline imports in 2023, with OPE taking an 18% share, a sharp change from the IGU’s first wholesale gas price survey in 2005, which showed 91% of all European pipeline imports linked to oil versus just 7% based on gas-on-gas competition.
LNG imports
Despite the significant increase in spot LNG trade over the last few years, oil indexed LNG imports retained a slightly higher share of world trade in 2023 compared to GOG trade, at 50.3% versus 49.7%.
Regionally, however, there were dramatic changes, largely reflecting the end of Russian piped gas imports into Europe, which forced markets there to look to LNG –largely on the spot market – to fill the gaps.
GOG imports accounted for 249 bcm of the global total, divided into imports into traded markets in North America and in European markets like the UK, Belgium, France and the Netherlands and in spot and short-term import markets, which includes virtually every other LNG importing country, led by Japan but also including China, India, Korea and others.
OPE imports amounted to almost 252 bcm, and were largely confined to long-term, oil indexed contracts on cargoes bound for Asia Pacific markets, largely Japan, Korea and Chinese Taipei, followed by Asia markets of China, India and Pakistan and European markets of
France, Spain, Turkey, Portugal, Italy and Poland. Spot LNG imports – essentially all GOG – began to increase in 2021 on the back of contracted spot cargoes from the US into Asian markets with spot LNG imports into China reaching a record of nearly 50 bcm in in 2021 before falling back the next year. Growth continued in 2022 and 2023 as Europe – looking to replace Russian piped gas imports – outbid other regions and mopped up increasing volumes of uncontracted supply, pushing spot volumes to nearly 65 bcm, or about 40% of all LNG imports into Europe, in 2022 and to more than 70 bcm in 2023. Overall, the volume of spot LNG cargoes have risen more than three-fold in the last seven years, from 63 bcm in 2016 to 191 bcm in 2023.
Total Imports
Total natural gas imports – the sum of pipeline and LNG imports – accounted for more than a quarter of global gas consumption in 2023, or about 1,060 bcm. Imports were comprised largely of GOG gas, at 56% of the total, followed by oil-linked trade at 37% and bilateral import agreements (BIM) at 7%.
Imports have comprised just those three categories of price formation in all 16 reports published by the IGU since 2005, and through those years, the shares of each have fluctuated according to market conditions.
OPE declined from 63% in 2005 to 59% in 2007, as GOG rose from just over 21% to 28% and then in 2009, OPE gained share rising to 66% as BIM fell from 14% to
“Over the period as a whole, GOG in domestic production has gained share from the three regulated categories which in 2005 totalled some 52% compared to 38% in 2023,”
WHOLESALE GAS PRICE SURVEY
6%, with GOG rising to 29%.
“Since 2009, OPE has lost market share by around 29 percentage points and GOG gained a similar share, in large part due to pipeline imports in Europe, but more recently the rising share of GOG in LNG imports,” the IGU report notes. “In volume terms, over the period 2005 to 2023, OPE pricing declined by 22% while GOG grew by 260%.”
Total Consumption
At the end of the natural gas value chain, IGU’s price report shows GOG gas with the largest share of price formation, at 49.7%, down slightly from a little over 50% in 2022.
“This largely reflected the impact at the global level of a continued decline in gas demand in Europe (which
is predominantly GOG) and the change in India domestic pricing to using oil price linkage from 2023 Q2 away from linkages to hubs in North America and Europe,” the report said, noting that increased spot LNG imports into Europe and China offset some of the GOG decline.
Total GOG consumption in 2023 was 2,036 bcm, with North America taking half that, at 1,140 bcm, followed by Europe at 383 bcm and the Former Soviet Union at 243 bcm.
OPE had a global share of 18% of consumption, or 740 bcm, with Asia dominating the market at 388 bcm and Asia Pacific at 227 bcm.
“OPE is found in 42 markets, now less than half the countries in Europe (and mostly at very small percentages), and in all regions except North America,” the report said.
Figure 4: Regional Price Formation 2023
LNG Imports
Figure 5: Global LNG Imports: Price Formation and Share of Spot – 2005 to 2023
Figure 6: World Price Formation 2023 –Total Imports
EU Green Deal under examination as voters shift to the right
The EU’s decarbonisaton plans will come under increasing scrutiny following a political shift to the right, but a u-turn on the Green Deal is not to be expected.
ANDREAS WALSTAD
As expected, the European Elections on June 6-9 saw a shift to the right with the Greens and Renew Europe, the liberals, each losing 18 and 23 seats respectively. The rightwing European Conservatives and Reformists (ECR) group and the far-right Identity and Democracy (ID) group each gained four and nine seats respectively. Meanwhile, the centre-right European People’s Party (EPP) will remain the largest political group by a clear margin with a total of 186 seats, up 10 seats.
Both the ECR Group and the ID group have campaigned against the European Green Deal, as have many of the non-attached MEPs who have also grown in numbers. The ECR has said the 2050 net zero target is unrealistic, with its manifesto stating that it wants to protect citizens, farmers and businesses from the negative impacts of the “current over-ideological green climate policy.”
The incoming European Commission (EC) is expected to propose a 90% greenhouse gas (GHG) reduction target for 2040, compared with 1990 levels, a sharp increase compared with the 55% by 2030 target which was adopted
in June 2021. There will likely be considerable opposition against the proposed 2040 target among MEPs. While at the same time, an ambitious 2040 target will be a prerequisite for reaching the net zero goal.
Lars Nitter Havro, head of energy transition analytics at Rystad Energy, highlighted that the parliamentary pro-climate coalition, which consists of EPP, S&D, Renew Europe, the Left (GUE/NGL) and Greens/EFA, holds 489 seats, well above the 376 seats needed for a simple majority.
“This majority suggests strong potential support for the 90% GHG reduction target within the parliament,” he said.
“Effective coalition-building and strategic compromises will be essential to secure support for the 90% target. Framing the target in a way that addresses economic concerns and energy security, and highlighting long-term economic resilience and competitiveness, will be crucial for gaining support from the new parliament and the council.”
CO2 emissions decline
CO2 emissions in the EU are on a downward trajectory. In fact, the EU has steadily decreased its GHG emissions since 1990, reaching a total reduction of 32.5% in 2022, although figures have been influenced by factors such as Covid restrictions and economic downturns.
Emissions in sectors regulated by the EU’s Emissions Trading Scheme (EU ETS) – including the power sector, heavy industry and aviation – fell by 15.5% in 2023 compared with the previous year, according to the European Commission (EC). With this development, ETS emissions are now around 47% below 2005 levels and well on track to achieve the 2030 target of -62%.
The most important driver for the drop in EU ETS emissions was the power sector, with emissions down 24% compared to 2022. This is due to a substantial increase in renewable electricity production – primarily wind and solar – at the expense of coal and gas. While the recovery of hydro and nuclear power also contributed to the fall in EU ETS emissions.
As for economy CO2 emissions, which also includes road transport, households and other sectors not in the EU ETS, CO2 emissions decreased by 4% in the fourth quarter of 2023 compared with the same period in the previous year. This illustrated a drop in emissions within each quarter of 2023, and it should be noted that during the fourth quarter of 2023, the economic sectors
responsible for the largest GHG emissions reductions were electricity and gas supply (-17.2%).
In line with falling GHG emissions, Europe’s demand for natural gas has been declining for two consecutive years. After a 13.3% annual decrease in 2022, demand fell by another 7.4% in 2023, totaling 12.72 million terajoules in 2023. This also marks the lowest demand recorded since the collection of monthly cumulated data began in 2008, according to the EC. The fall in demand comes against the backdrop of the EU setting a voluntary 15% reduction target for gas consumption, compared with the five-year average between April 2017 and March 2022.
Hard-to-abate sectors
Reducing emissions in the power sector will not be enough to reach climate targets. The EU must also tackle emissions from other sectors such as road transport, buildings and heavy industry. A roll out of new technologies including green hydrogen and carbon capture and storage (CCS) will be necessary to achieve this.
The Net Zero Industry Act (NZIA) adopted by the EU earlier this year set ambitious targets including a 50 MTPA CO2 injection capacity target by 2030. There is however a great deal of uncertainty linked to this target and how they will be achieved.
Source: Verian for the European Parliament
CO2 emissions in the EU are on a downward trajectory. In fact, the EU has steadily decreased its GHG emissions since 1990, reaching a total reduction of 32.5% in 2022
Rystad Energy said in a recent note that while capture technologies at emission sources have matured, the development of injection and storage infrastructure is not advancing at the same pace.
“The growth in injection capacity, essential for realising the full potential of CCUS, has been hampered by a slower-than-expected development of storage sites, which remains a significant bottleneck. Recent data indicates that projected CO2 injection capacity will fall short of the NZIA target by about 63% by 2030, reflecting a widening gap between ambitious decarbonisation goals and the current pace of infrastructure development,” it said.
Similarly, Rystad Energy said that despite considerable investment and policy support, hydrogen electrolysers are not meeting the ambitious goals set by the NZIA.
The recent Hydrogen Bank auction results, where a total of 1.5 GW of electrolyser capacity received support, which underlines the challenges in scaling up hydrogen production to meet the EU’s target of 100 GW by 2030.
“Currently, the risked pipeline for hydrogen electrolysers is falling 45% short of this target, highlighting a significant gap in achieving the required installation capacity. This shortfall can be attributed to a variety of factors, including technological challenges, high initial costs, and the slow development of the necessary infrastructure to support a widespread hydrogen economy.”
Financing under the new EU institutions
A key question is to what extent the new commission and
parliament will mobilise financial support for clean tech advancements, in order to keep up with the US and China where energy costs less and subsidies are targeted, such as the tax breaks under the US Inflation Reduction Act (IRA).
“While it is currently too early to determine the exact composition of the new Commission, it is clear that there will be varying degrees of support for clean tech subsidies in the EU. Although far-right parties, if unified, would form the second-largest Parliamentary group and generally share skepticism towards climate action, there is a growing understanding across the political spectrum that clean tech is vital for a robust and future-proof European industry, as well as energy security,” said Havro.
“Therefore, while a united policy front supporting clean tech subsidies is not guaranteed, the intrinsic value of clean tech for economic and energy security might garner support from both sides of the political spectrum.”
As for recent developments, the EC announced that the budget for the next Hydrogen Bank Auction will be €1.2 billion, up from €800 million in the first auction. The second auction will take place before the end of the year.
Meanwhile, ING Bank said in a research note that a second term for EC President Ursula von der Leyen, if she is re-elected for a second term, would bring different priorities.
“With the strong losses for the Greens and the rise of populist parties, a new or more ambitious Green Deal looks highly unlikely. Instead, a second von der Leyen commission would probably focus on security issues, industrial policy and extended or softened deadlines and regulations for the green transition,” ING said.
BUILDING VISIBILITY OF GAS AND GAS FOCUSED TECHNOLOGY AS A PERMANENT AND GROWING PART OF THE GLOBAL ENERGY MIX
Natural gas can continue to play its significant economic and environmental role in the global energy mix for decades to come, offering clean, secure, and affordable energy for global citizens.The extent to which the industry demonstrates and effectively communicates the key role of gas in a sustainable energy future, against the backdrop of a groundswell of anxiety about climate change, environmental, economic security, and political risks will determine theextent of its continuing success.
Gas Pathways is being developed with a view to becoming the authoritative, credible, and fact-based national and international communications platform amplifying the innovation agenda around gas energy –and gas energy infrastructure; demonstrating that the natural gas sector is focused about making affordable energy available to all, and about maximizing resiliency in energy delivery.
UK power: Still a key role for gas despite shrinking market share
The share of natural gas in the UK’s electricity mix is expected to decline further although the fuel will continue playing a crucial back-up role for renewables as coal is phased out and nuclear reactors come offline.
ANDREAS WALSTAD
“We project a much larger increase in renewable capacity, especially wind, over the forecast period. All coal capacity will be shut down by end 2024 and some nuclear will also exit the generation mix, though not before at least 2026 given extensions to some plants.”
PHIL COPE, SENIOR ANALYST FOR INFRASTRUCTURE FINANCE AT MOODY’S.
Gas consumption in the UK’s power sector has declined in recent years while the share of renewables, particularly wind power, has increased.
In 2023, gas accounted for about 34% of electricity generation, down 4.5 percentage points on the previous year, according to data from the Department of Energy Security and Net Zero (DESNZ). Total electricity generation from gas-fired plants decreased by 22% year on year.
The share of onshore wind was more or less stable year on year at 11% while the share of offshore wind generation rose to 17%, up by around three percentage points. The shares of bioenergy, nuclear power and solar power were more or less unchanged, representing 12%, 14% and just under 5% of generation respectively.
Renewable generation was the same in 2023 as the previous year at 135 TWh, according to DESNZ, but lower total generation meant that this represented a record share. The share of electricity generated by renewable technologies increased 5.3 percentage points to 47.3%, 10.9 percentage points higher than the share generated by fossil fuels.
Total electricity generation decreased 11% in 2023 while demand decreased by 2.2%.
This meant the UK returned to being a net importer of electricity after exporting record levels of electricity in 2022. The UK has power interconnectors with France, Belgium, the Netherlands, Denmark and Norway.
In total terms, electricity generated from wind increased despite lower average wind speeds, helped by additional generation capacity, and solar power generation also increased despite lower daily average sun hours, DESNZ said. In contrast, nuclear power generation
fell by 15%, less than half the generation from nuclear 20 years ago. This is due to the closure of two reactors in 2022, at EDF’s Hunterston B, and all operational reactors experiencing outages throughout 2023. The UK’s nuclear power fleet is ageing, with many reactors expected to be taken off the grid before the end of the decade.
EDF’s 3.2 GW Hinkley Point C nuclear power plant in Somerset, southwest England, has been subject to delays and cost increases and may not become operational before 2031. Moreover, EDF has yet to take final investment decision (FID) on its planned, 3.2 GW Sizewell C nuclear power plant in in Suffolk, in the east of England, although this is expected later this year. Nevertheless, completion is not expected before around 2035 if everything goes to plan.
Gas for power on downward trend
Against this backdrop, a combination of gas and renewables will continue to dominate the UK’s power mix for the foreseeable future. That, however, may not stop the share of gas from declining.
“We expect a reduced proportion of gas in the UK’s future electricity mix, in alignment with the government’s commitment to achieving a net-zero power sector by 2035,” says Yeshvir Singh, senior director at Fitch Ratings.
“While the pace of reducing gas-fired generation remains uncertain, we believe the current trend suggests a sustained decline, with political willingness to reduce dependency on gas for electricity generation. In our view, this has the dual objectives of reducing CO2 emissions and enhancing the visibility of wholesale electricity pricing.” Singh adds that the opposition Labour party has set a more ambitious target of clean power by 2030 ahead of
the elections on July 4 this year. In its manifesto, Labour says it will work with the private sector to double onshore wind, triple solar power, and quadruple offshore wind by 2030. It has also pledged to invest in carbon capture and storage (CCS), hydrogen and marine energy as well as energy storage. At the time of writing, polls suggest Labour is on course to win the election.
Fitch Ratings expect renewables will be pivotal in the UK’s decarbonisation efforts, underpinned by its goal to increase offshore wind generation capacity to 50 GW by 2030.
“This represents a substantial increase from the 14.7 GW capacity at the close of 2023, setting a very ambitious target. However, the actual rate of expansion in offshore wind deployment will be influenced by several factors, including potential delays in grid connection, timeliness of the permitting processes, as well as the pricing dynamics of contracts for differences,” says Singh.
To reach the 2030 target, Singh notes, it is necessary to integrate an average of 5 GW of new offshore wind capacity annually. However, in 2023, the UK witnessed the addition of a mere 0.8 GW in new capacity, indicating a substantial acceleration is required to meet the targets.
Analysts at Moody’s Ratings expect that gas-fired capacity will increase from about 34.6 GW in 2022 to 38.1GW by 2028. The 900 MW Keadby 2 CCGT plant, owned by SSE, was one of the most recent additions after it became operational in March 2023, helping to offset the weaker than expected rise in renewable generating capacity.
“However, we project a much larger increase in renewable capacity, especially wind, over the forecast period. All coal capacity will be shut down by end 2024 and some nuclear will also exit the generation mix, though not before at least 2026 given extensions to some plants,” says Phil Cope, senior analyst for infrastructure finance at Moody’s.
“In terms of output from gas-fired power plants, we do expect this to be below 100 TWh per annum over 202427 as compared to around 120 TWh in 2021 and 2022. With the growth in gross electricity production, mainly from renewables, then yes it would decline.”
CO2 emissions drop
Cope notes that high power and gas prices led to a slowdown in industrial consumption in 2022 and 2023 which supported the fall in CO2 emissions over this period. Provisional government figures suggest CO2 emissions in the UK declined by 6.6% year on year in 2023.
Cope notes that high power and gas prices led to a slowdown in industrial consumption in 2022 and 2023 which supported the fall in CO2 emissions over this period. Provisional government figures suggest CO2 emissions in the UK declined by 6.6% year on year in 2023. At 302.8 million tonnes, that is 52.7% lower than they were in 1990. The decrease in 2023 is primarily due to a reduction in gas demand from the electricity supply and buildings and product uses sectors, according to the government.
The UK’s forthcoming renewables auction (AR6), for which the results are expected around July 19, will reveal how much offshore wind that will be awarded contracts for difference (CfDs). This comes as the UK government significantly increased the maximum strike price for offshore wind projects from the last auction (AR5), from £44/MWh to £73/MWh (in 2012 prices).
“I believe there is around 10 GW of capacity that is eligible to participate in the auction with the largest projects being Vattenfall’s Norfolk Vanguard (East and West), 2.76 GW, and Orsted’s Hornsea 4 project, 2.6 GW,” says Cope.
“If say 3-5 GW of offshore wind is awarded capacity then given the long lead times associated with building offshore wind farms it would be very difficult to meet the UK’s policy ambition of 50 GW of offshore wind by 2030.”
DECARBONISING ENERGY: INNOVATION AND START-UPS
Waga Energy: breakthrough technology for producing RNG from landfill gas
Waga Energy’s WAGABOX technology offers “the only standardised solution adapted to all landfill sizes and gas composition,” capturing 90% of the methane in landfill gas for grid injection, even in air concentrations of up to 30%.
Waga Energy’s innovative technology, the result of more than 15 years of research and development, harnesses the untapped potential of landfill gas to produce renewable natural gas (RNG) that is both carbon neutral and cheaper than more common production methods, CEO Mathieu Lefebvre tells Global Voice of Gas
Established in France in 2015 as a spin-off of Air Liquide, Waga Energy opened its first landfill gas-to-RNG plant two years later and in 2019, expanded into the
North American market. The company now owns and operates 27 plants in France, Spain, Canada and the US, with more under development. It commissioned its first US unit in March this year, in Steuben county, New York, with a capacity of 207,000 mmBtu of RNG. There has been growing recognition in recent years of the important role that RNG, otherwise known as biomethane, will play in the energy transition, as evidenced by a surge in policy support, particularly in
“Our mission is to develop as fast as possible, to make this incredible energy available for as many people as possible, and have maximum impact on fighting global warming.”
WAGA ENERGY CEO MATHIEU LEFEBVRE
Europe and North America. While most of the biogas that is upgraded to RNG today is captured from anaerobic digesters, it can also be recovered from landfill sites using wells and compressors, piping the gas to a central collection point.
A “breakthrough” technology
Obtaining biogas and subsequently RNG this way carries various extra challenges, such as dealing with varying composition of the landfill gas, the presence of contaminants and difficulties with efficient collection. But Waga Energy’s WAGABOX technology offers “the only standardised solution adapted to all landfill sizes and gas composition,” according to the company.
This “breakthrough” technology, according to Waga Energy, filters the raw landfill gas through membranes to extract carbon dioxide, and then it is distilled at a cryogenic temperature to isolate the methane from the nitrogen and oxygen. Doing so captures 90% of the methane contained in landfill gas that would otherwise escape to the atmosphere even with air concentration of up to 30%, for network-compliant RNG that is at least 98% pure methane. The remaining 10% of methane is used on site to burn any volatile organic compounds found in the landfill gas.
Untapped potential
Landfill gas is a massive energy source that largely has not been exploited, Lefebvre says, noting that there is around 3,400,000 MMBtu of biomethane potential at 20,000 landfill sites worldwide.
“That’s two and a half times the natural gas consumption of France, but 90% of this resource is wasted – either flared or released into the atmosphere, contributing to global warming as methane is a very powerful greenhouse gas” he explains.
Harnessing this resource for energy therefore has the added benefit of avoiding methane emissions. Instead, a carbon-neutral cycle is created, whereby CO2 is captured by the biosphere, then the gas from organic matter is recovered into biomethane and then combusted for energy, releasing CO2 back into the atmosphere that is then absorbed by the biosphere once again.
“What was a source of atmospheric pollution is now a resource. What was a cost is now a source of revenue,” Lefebvre says.
RNG from landfill gas is also a local resource in stable supply, as the decomposition of organic waste goes on for decades and is highly predictable. These qualities make it particularly valuable in Europe, in light of the fallout from the Russia-Ukraine war, which has highlighted the importance of energy security and greater energy independence.
JOSEPH MURPHY
MATHIEU LEFEBVRE, WAGA ENERGY CEO
On affordability, RNG from landfill gas is more expensive than natural gas but Waga Energy is focused on bridging that gap as much as possible. It is also cheaper than RNG produced via other means, because of a number of factors. Landfills typically produce large and consistent volumes of gas over longer periods, leading to economies of scale. Many modern landfills are also already equipped with gas collection and control systems, reducing the need for additional investment.
Waga Energy sees potential for driving costs down further through improved practices, and sees carbon credit opportunities as a “cherry on the cake,” estimating that around 350,000+ tonnes of CO2 equivalent is avoided over a WAGABOX unit’s lifetime of 20 years, by displacing natural gas.
Policy landscape
The extent that policy supports the development of RNG from landfill gas differs greatly from country to country. Waga Energy has naturally targeted markets where that support and the economics at landfill sites are strongest. In France, its home market, the government provides feed-in-tariffs for RNG and has a legal target to raise the share of RNG in the gas grid to 7% by 2030. France is an RNG leader, accounting for around 20% of Europe’s total production.
In its 2022 REPowerEU plan, the European Commission set a target of expanding biomethane production almost tenfold to 35 bcm annually by the end of this decade. However, proponents of RNG have criticised the EU for not including legal obligations for member states reaching this goal in its recently approved gas and hydrogen market package.
“So if we do not achieve this objective, who will be penalised? We have the resources, we need now a sufficiently binding legal framework to succeed in reaching this objective” Lefebvre says.
What is more, the EU needs to do more to facilitate cross-border trade of RNG that is certified as sustainable, as “there are too many countries with too many policies
“What was a source of atmospheric pollution is now a source of energy. What was a cost is now a source of revenue.”
WAGA ENERGY CEO MATHIEU LEFEBVRE
that are not harmonised at all.”
Waga Energy describes North America as “a land of opportunities,” given the abundance of largescale landfill sites that have not yet utilised their gas, support under the US Inflation Reduction Act (IRA), and Canada’s natural gas utilities targeting RNG content in their grids by 2030.
Looking forward
Looking forward, the company also studies the deployment of its solution in Australia, Brazil, Colombia, Italy, Mexico, Morocco, Portugal and the UK, and is also eyeing opportunities in Central and Eastern Europe.
From an installed capacity of 1 TWh of RNG today, the company aims to expand this to 4 TWh in operation and in construction by the end of 2026, achieving revenue per year of €200mn ($216mn).
“Our mantra is renewable natural gas for all,” Lefebvre says. “We need affordable, local and renewable energy to embrace the energy transition. Electrification is great but we will not be able to electrify everything – 85% of the energy we consume comes from fossil fuels and the alternative there is biomethane.”
“Our mission is to develop as fast as possible, to make this incredible energy available for as many people as possible.”
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