Make natural gas attractive again
Volatile oil and gas prices and production have caused global energy investment to decline by 8% in 2015 – the lowest since 1960s, said Dr Fatih Birol, Executive Director of the International Energy Agency (IEA) during the lunch plenary of the Singapore Energy Summit...
By Marco Aw
Volatile oil and gas prices and production have caused global energy investment to decline by 8% in 2015 – the lowest since 1960s, said Dr Fatih Birol, Executive Director of the International Energy Agency (IEA) during the lunch plenary of the Singapore Energy Summit.
Rising oil and gas production by non-OPEC producers and Saudi Arabia have led to an oversupply in the market, he added. At the same time, large LNG capacity additions are coming in from Australia and United States
Amidst the lower energy investment, investments are shifting toward renewables, networks, and efficiency. Renewable generation is projected to rise by almost two-fifths between 2015-2021, driven by the Paris Agreement, lower costs of renewables and air quality concerns – which partly explains why China is the champion of renewables, said Dr Birol.
Natural gas still has an important role, said Charif Souki, co-founder and Chairman of Tellurian Investments.
“With low prices, you are already seeing demand coming from different places […] even in the Middle East, demand for natural gas is increasing very rapidly,” said Mr Souki.
New demand engines are developing in the Asian region, added Dr Birol. From not having any LNG importers in 2010, countries such as Singapore, Malaysia, Thailand and Indonesia are now importing it in 2016. It is therefore important to keep gas attractive, he said.
Despite this, investment in gas infrastructures continues to face competition from coal and renewables. 85% of global coal power investment come from the Asian market, with infrastructures costs favouring coal over gas.
By building coal plants, future carbon emissions are being locked in. It is therefore imperative that climate change is addressed when energy is discussed, said Dr Birol.
Natural gas has helped reduce carbon emissions in the United States by 12% over the last five years, added Mr Souki.
“There are certain areas I think the gas industry has to look carefully at to make fuel more attractive. This includes bringing more flexibility in the contracts and giving a second look into some issues such as the destination clause,” said Dr Birol.