Page 27 - European Energy Innovation - Spring 2017 publication

Spring 2017 European Energy Innovation
Winston Churchill, as First Lord of the
Admiralty was the first to press for such
a change, and after the British had
switched to oil, other nations followed
suit. With major developments in its
exploitation and refining, oil could offer
enhanced manoeuvrability and smaller
scale application, which provided a
competitive edge in naval warfare. This
marked the beginning of the age of
oil, as its use became predominant in
transport and heating. Eventually it has
replaced coal as the primary global
energy source.
What we are experiencing nowadays
is very similar to that shift. Natural gas
is harder both to exploit and transport
than oil, but it has some features –
particularly its cleanness and efficiency
– which make it a superior source of
energy. Substitution is not possible in
every application, for example it cannot
be used as a feedstock in all cases, but
the technological changes foretell a
shift from coal and oil to natural gas. The
prediction of the International Energy
Agency about the coming golden age
of gas could have been premature, but
it is clear that the role of natural gas will 2-3 years, we will see not just a boom
grow in the next decades.
When contemplating the evolution
of fossil fuels, we cannot overlook
the common fate that will come to
most species eventually: extinction.
Natural gas might be the cleanest, but
it still creates harmful emissions. Mass
scale electrification and the spread of
renewable energy challenge the rule of
fossil fuels, but in my opinion, the end
is not yet close. Not every application
can be electrified and the intermittence
of renewable power sources requires a
flexible backup, which is most efficiently
provided by natural gas. In the coming
decades, both its overall demand
and its share in the global primary
energy consumption are expected to
grow. It seems that natural gas will not
become extinct soon, on the contrary,
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27
LNG
its importance is about to increase previously untapped reserves. From
considerably around the globe. the improvements in liquefaction and
regasification, to the vast new shale gas
The supremacy of oil started when it production, the natural gas market has
gained a truly global market. I would seen many fundamental changes, both
call a market truly global, when one incremental and transformational ones.
can buy a standard amount in a fairly These changes have revived industries
standard quality for a somewhat and altered geopolitics, and those
uniform price all over the globe. You who adapted to them usually gained
can buy a barrel of Brent quality crude momentum.
in Singapore and in Rio de Janeiro
for about the same price at a given I believe that, due to the rapid
moment. Natural gas markets cannot developments, gas markets will change
perform like that because of the costs fundamentally in the coming five to
of transport (both for pipeline and LNG) ten years, and I do not see the pace
and the lack of liquidity. Inadequate of the changes slowing down. Take
demand, combined with high fixed for example Floating LNG (FLNG).
costs halted the development of natural The first operating floating facility,
gas markets, when suppliers tended stationed in Malaysia, received first
to be monopolistic and long term gas in last November, and is about to
contracted. With increasing demand launch its first cargo in early March
and decreasing transport costs, the 2017, a historical moment. With such a
competition has intensified and the novel technology, there are bound to
markets have become more liquid. arise new challenges and unexpected
We can already see the contract time difficulties, but further innovation will
horizons shrinking, while the terms surely tackle them, expanding natural
of the contract become increasingly gas production to previously
loose. With the LNG projects under untapped reservoirs.
way, which are to be realized in the next
As we have seen, the evolution of
in LNG trade, but also a massive and fossil fuels has accelerated, changing
unprecedented integration of the status quo on the energy market.
the markets. Technological and consumption
changes have paved the way for
This rapid development and integration a radical shift in business models.
of markets is essentially due to Although oil and coal are to stay
innovation. In the last decades we with us for many years, they will not
could see innovation reducing costs all significantly question the primacy of the
over the supply chain, while unlocking new champion: natural gas. l
András Gyürk
• Born in 1972, graduated in history in Budapest
• 1998 – 2004 member of the Hungarian Parliament
• 2004 – member of the European Parliament (Committee on Industry, Research
and Energy, EPP)
• 2010 – head of the Hungarian EPP delegation
• Shadow rapporteur on the Energy Union Package – A Framework Strategy
• Rapporteur on the EU Strategy for LNG and Gas Storage