The future of gas in the energy mix

Remi Eriksen talks about Carbon Capture and Storage on stage at ONS 2016
DNV GL Group President and CEO Remi Eriksen calls for a greater gas industry commitment to Carbon Capture and Storage (CCS) at ONS 2016.
ONS, Stavanger, Norway: Fugitive methane emissions and a real commitment to downstream Carbon Capture & Storage (CCS) are two issues the natural gas industry must address if it is to enjoy long-term public and policy support. It could be the ideal partner in a sustainable future energy mix, where the flexibility of gas complements the variability of renewables to ensure steady energy supply, taking coal out of the picture. DNV GL Group President & CEO Remi Eriksen called on industry leaders at ONS to join forces on CCS for gas, saying the North Sea could be Europe’s CO2 energy storage hub with the potential to create a new billion dollar industry.
Remi Eriksen takes questions from YSI members on stage at ONS 2016
Alex Moltzau, Communciation Manager at Oslo-based Young Sustainable Impact questions DNV GL Group President & CEO Remi Eriksen at ONS 2016.

Remi Eriksen focussed on the role of gas in the future energy mix when he took to the main stage on Wednesday morning. The full text of his speech is reproduced below, and you can view his interview with ONS TV here.


“Excellencies, ladies and gentlemen – good morning to each one.

“I am going to share some reflections on the role of gas in the future energy mix.  I think it might be helpful to begin this task by quickly taking stock of the present, fairly challenging circumstances. I will then do my best to lift the mood in the room by exploring what positive roles gas can play in the future energy mix – perhaps we can call that the Blue Age of gas. 

“I am very aware that I am speaking just after Kamel Ben Naceur, and I have no wish to gainsay his forecast for gas.  But I am sure he will agree that forecasters do not model the extraordinary. Today I will outline what I believe to be some extraordinarily important actions the industry must take to place this precious resource on to a more assured track – one that is more likely to find better public backing and policy support.

“The Golden Age of Gas that some were anticipating just five years ago - has evaporated. Certainly in the short term, demand is weaker than expected – especially in Asia – and cheap coal is a major difficulty. Oversupply is looming large for at least the next three years as more liquefaction capacity comes on-stream from the US and Australia in the form of 100 plus MTPA (million tonnes per annum).

“As these short and medium- term dynamics are playing out, COP21 and its aftermath suggest an ever-more constrained path for hydrocarbons in the longer term. On top of that, the plunging costs of renewable energy are a constant challenge to forecasters – [as we have just heard] upwards adjustments of the share of renewables in the energy mix have now become almost a matter of routine.

“So - from its current, less dominant position, how can natural gas move towards a more assured future? How can the gas industry ensure that it optimises its share of the future energy mix, where no single source of energy can possibly satisfy the demands of a growing world?

“To help address these questions, allow me to invite the future into this room.  In Norway, a group of young people have formed Young Sustainable Impact as a platform for the next generation of forward-looking-thinkers to help solve our climate-related challenges.  Some members of Young Sustainable Impact have been kind enough to send me videoed questions about the future of natural gas.

“Now – it is time for our first question.”

Question 1: “Hi Remi. How will current levels of CO2 emissions be affected when natural gas is substituted for coal in electricity generation?” – Alex Moltzau, Communication Manager, YSI

“Thank you Alex. The benefits of shifting from coal to gas for power generation are many. These advantages include 50% less CO2 and much smaller amounts of NOx, SOx and the absence of fine particulates and well as other pollutants like mercury and arsenic. In addition, there is far less power plant water usage.

“All this comes in addition to the much greater flexibility that gas offers to  power grids, especially with the integration of more and more renewables.

“As to how much switching there will be from coal to gas-fired generation, I think this is mainly a USA-based story for the medium term.  The moratorium placed by China on new coal-fired generation post 2020 to deal with air pollution is also significant. We still lack a global price on CO2 emissions that many of us in the industry have called for over years, and that would give gas a much improved competitive position versus coal.”

Question 2: “Is gas a friend or an enemy of renewables?” – Amund Grytting, General Manager, YSI

“I think the answer is both! There is no question that the flexibility offered by gas offsets the variable nature of renewables. In this sense these two energy sources are natural and excellent partners.  But let’s not forget they can also be competitors. Renewables do and will compete with gas, just as cheap gas can impede the development of renewables in the short term.

But turning back to the ‘friends’ side of the equation let me cite a recent example. Chile is only accepting bids for solar projects if developers provide a 24-hour supply solution. This means that developers now have to offer gas-fired generation or industrial-sized batteries to provide solar generation back-up.

But these examples do not ‘prove’ the ‘greenness’ of gas.  We must recognize that natural gas is actually a “frenemy” of renewables. This duality suggests that a good deal more co-operation, co-planning and co-development should be happening between the renewables and gas industries.”

Question 3: “Gas is not just gas, right?” – Didrik Støhm, Innovation Manager, YSI

“Gas most certainly does come in many forms. Take LNG. Due to differences in natural gas sources, production technologies and the target markets for the LNG, the composition may vary substantially depending on the geographical origin. For instance, between Libya and Trinidad there is a 17% difference in the level of calorific value.

“From a technical perspective there are ways of deepening the friendship between gas and renewables, precisely by recognising that gas is not just gas. Imagine a future Power 2 Gas value chain – where curtailed electrical power from offshore wind might be converted into hydrogen – which is then injected into the existing gas infrastructure. 

“DNV GL is now launching the Hyready JIP with several European partners with the aim to develop technical guidelines for the injection of Hydrogen into gas transmission and distribution networks.

“Hydrogen and bio-methane offer significant potential to green the gas supply for power and heating, but it is critical from a performance and safety perspective to thoroughly understand all the effects new sources of gas may have on existing infrastructure.”

Question 4: “What about gas in transport?” – Maria Katarina Michelsen, Programme Manager, YSI

“The proportion of gas currently used in transport is very low – some 5% of the transportation fuel mix. Can this grow substantially?

“Maria, if you consider your future car, there is a possibility that it could be powered by hydrogen or biogas, or maybe CNG. It is difficult to build projections for the uptake of these technologies because they are very dependent on incentive schemes and sensitive to the plunging cost of battery electric vehicles.

“It is a different matter in seaborne transport. For deep sea shipping LNG is almost certainly the only viable alternative for significantly reducing GHG emissions apart from maybe nuclear power.  However, the volume of LNG powered ships is low – too low I think – we have 80 LNG vessels in operation and a further 90 on order.

“Shipping is the life blood of the global economy - it moves about 80 per cent of world trade by volume - so a cleaner alternative to bunker oil and diesel will have an impact.”

Question 5: “What can the gas industry do about the serious problem of methane emissions?” – Tilde Martine Midtvedt, Partnership Manager, YSI

“The attractiveness of gas versus coal is greatly reduced by the concern over the fugitive methane emissions from fracking and through the upstream processing and tranpsort of natural gas. Methane leakage diminishes the claimed advantages of natural gas over coal – while boosting the actual advantages of renewables.  In the near term this is the biggest non-price-related barrier to policy support for natural gas.   In my view there is a great deal more that the industry can do.

“I don’t have the time here to list the various abatement measures. However, I think we can agree though that it is not rocket science: we’re talking about direct inspection, sound maintenance programmes, and reasonably easy-to-implement alternatives to venting.

“A number of influential studies have emerged recently to show that a high proportion of Methane can be abated at no additional cost.  For the natural gas industry these no-cost options are at least 35% of all abatement opportunities – and that is significantly better than the coal industry where only 10% of abatement options come at no new cost.  Regardless of this advantage, the industry simply must solve this.”

 Question 6: “With the plunging cost of renewables is there actually a position for gas?” – Alex Moltzau, Communciation Manager, YSI

“There is no doubt that the future energy mix will be decarbonized.  But rather than talk about a 100% renewables-powered world – which is a very distant reality – we should really be thinking 80/20 in the long term. The gas industry needs to make sure that gas will be the source that is used for the 20%, and that requires seeing gas not just as a commodity but as a strategic resource.

“And a strategic resource requires a strategic approach. The industry cannot rely on price alone to drive demand: it has to help policy makers and planners understand, anticipate and desire the non-price-related benefits of gas. These non-price-related benefits include the fact that the world is moving to distributed power generation, where gas can play a starring role. 

“Gas can make a critical contribution to the UN Sustainable Development Goal No.7 on access to affordable and clean energy for all.  As recently as the 5th of July, DNV GL gave approval in principle to IHI Corporate for its design of an innovative Floating LNG Power Station - a combination of a FSRU and a power plant. It is expected to be installed in locations where alternative onshore infrastructure is not feasible or commercially viable, and where energy demand is rapidly increasing.

“Selling the concept of gas as a strategic resource calls for a ‘marketing mindset’ – far removed from a commodity mentality. The image of gas is vitally important to secure public acceptance and support for new gas projects.

“With this in mind, I would like to conclude my talk with a comment on Carbon Capture and Storage.

The long term forecasts that limit warming to the 2 degrees Celsius or less all assume varying degrees of CCS for coal, for various industrial applications and for gas. The gas industry cannot be a passive observer in CCS developments, assuming only coal, or other industries like cement, will bear the brunt of CCS investments.

“So what should the industry do?  Firstly, let’s take heart from the exciting CCS value chain initiatives that government and industry players are working on together here in Norway. It is not fanciful to think that by 2022 we could have a CO2 storage hub on the Norwegian Continental Shelf. Gas with CCS is technical feasible, with commercial feasibility depending on economies of scale and infrastructure sharing.

The North Sea can serve as the CO2 storage hub for Europe and become a well-spring of a new billion dollar industry, with huge savings for the cost of combatting climate change and with upside for gas in the future energy mix.

“Because without CCS, there is no long term future for gas.

“Can we do it? When I look around me here at ONS, I see expertise and experience that has already changed the world. We can do it again, and I want to put together a Chief Executive-led initiative on this – anyone interested, please contact me.

“So, to conclude: The blue age of gas… we cannot afford a future where policy-makers and the public see gas as part of the problem, or, at best, as only a weak weapon against climate change.

“The flexibility of gas will only gain traction when methane emissions and CCS are addressed with a will and at scale. Let us not be the subjects of a forecast. Let’s take extraordinary action.”