All energy roads lead to decarbonization with gas as a linchpin of low-carbon transformation

With the winds of change sweeping over the global energy landscape, the world is reshaping and adapting to the emerging sources of supply and decarbonization technologies to future-proof its supply mix and come to grips with climate change complexities. Despite the growing opposition to fossil fuels, natural gas, primarily LNG, is still the top contender for the transition fuel, which will bridge the gap and pave the way towards the sought-after low-carbon and green energy future. In line with this, gas investments and production are expected to be on the rise to meet the market demand and steer clear of potential future shortfalls in supply.

While there is no one-size-fits-all solution to the energy transition challenge, natural gas is often hailed as the backbone of the energy mix, which is tailored to help countries around the world slash emissions to appease the increasingly intertwined concepts of energy security and sustainability on the transition quest to a cleaner energy future. This opens the door to speculation about the actual role of LNG and natural gas in the future energy mix with some being adamant that gas will act as a trump card while the world embraces the race to net-zero.

This is aligned with the views recently expressed by the CEO of Qatar’s state-owned energy giant, QatarEnergy. While underlining the importance of harmonizing energy security, affordability, and sustainability in the quest for an equitable and realistic energy transition, Saad Sherida Al-Kaabi spotlighted the role of natural gas in the evolving energy landscape, portraying it as a key piece in the energy transition puzzle and beyond due to renewables’ intermittent nature.

QatarEnergy’s CEO made similar remarks during the LNG2023 Conference & Exhibition in Vancouver when he claimed that gas would continue to be needed in the future as the cleanest fossil fuel for the base-load required for electricity production and for powering industrial and manufacturing factories. A recent report from the Energy Industries Council (EIC) outlines that Qatar is positioned for further growth, solidifying its position as the world’s top exporter of LNG.

This is also confirmed by Wood Mackenzie, which claims that the competition in delivering the next wave of LNG growth will be fierce, though Qatar and the U.S., with 40% of global supply between them, are expected to be the front-runners by a mile, thus, their combined market share is expected to exceed 60% by 2040. QatarEnergy recently set the wheels in motion for the second phase of its LNG ship acquisition program, which will support its North Field LNG expansion and Golden Pass LNG export projects along with its long-term fleet replacement requirements.

As the Persian Gulf state intends to boost its LNG production, Sheikh Tamim bin Hamad Al Thani, Amir of the State of Qatar, laid the foundation stone of the North Field expansion project on Tuesday, October 3, 2023. This will raise Qatar’s LNG production capacity from the current 77 million tons per annum (mtpa) to 126 mtpa by 2026. The project encompasses six mega trains, each with a production capacity of eight mtpa of LNG, four of which are part of the North Field East expansion project, and two are part of the North Field South expansion project, contributing a total of 48 mtpa to the global LNG supplies.

Speaking at the ceremony, Al-Kaabi underscored: “On the local level, this project will have short- and long-term impacts that will be reflected across all sectors of the Qatari economy and will significantly enhance the state’s revenues. This major expansion comes at a crucial time, as natural gas occupies a pivotal position in the energy mix in a world facing geopolitical turbulences and is in dire need of clean energy sources that are in line with the global environmental goals.

“There is no doubt that these additional quantities of natural gas are of great importance as they will play a prominent role in enhancing energy security, supporting a practical and realistic energy transition, and ensuring fair and equitable access to cleaner energy for a sustainable growth and a better future for all.”  

This content is available after accepting the cookies.

Change cookie-settings View on Twitter.

The North field is one of the largest single non-associated natural gas fields in the world, which is operated by QatarEnery LNG and lies off the northeast shore of the Qatar peninsula. QatarEnergy’s partners in the North Field expansion project are TotalEnergies, Shell, ConocoPhillips, ExxonMobil, Eni, Sinopec, and CNPC.

In addition to LNG, the project is expected to produce 6,500 tons per day of ethane gas, which will be used as a feedstock in the local petrochemical industries. The project will also produce about 200,000 barrels per day of liquefied petroleum gas – propane and butane –  and about 450,000 barrels per day of condensates, aside from large quantities of helium and pure sulfur.

QatarEnergy’s efforts to raise its gas production serve as a case in point for the findings disclosed within a new research report from Westwood Global Energy Group, a specialist market research and consultancy firm. The market research player elaborates that gas production is expected to increase by about 10% by 2030 from new projects in areas such as Mozambique, the Mediterranean, onshore U.S., and brownfield developments, such as the North Field expansion offshore Qatar.

Westwood’s Wells & Production Outlook 2023-2030 shows that liquids and gas production is set to reach 173 mmboepd by 2030, with 8% growth on 2022 levels, driven by increased crude production from deepwater areas, such as Brazil and Guyana, as well as additional supply from the Middle East. The company’s research reveals that substantial drilling activity, averaging 53,000 wells per year through to 2030, will help elevate the production of crude, condensate, natural gas, and natural gas liquids (NGLs) to a high of 173 mmboepd by 2030, up 9% from 159 mmboepd in 2022.

Furthermore, these findings indicate that 428,000 wells are expected to be drilled over the forecast, with onshore accounting for 95%, dominated by China, Russia, and the U.S. On the other hand, more than 17,000 surface wells are forecast in the offshore segment – with activities driven by Qatar and Saudi Arabia – while 2,000 subsea wells are expected between 2023-2030, led by the Americas.

According to Westwood, much of the basis for this supply has been sanctioned and 3 mmbpd of the FPSO capacity has passed the final investment decision (FID) between Brazil and Guyana but are yet to commence commercial operations, while many of the major expansion projects in Saudi Arabia and the UAE have also been sanctioned, with construction underway.

Ben Wilby, Senior Analyst at Westwood, pointed out: “The level of investment seen in the last few years will lead to a material increase in structural production capacity over the forecast. As a result, continued OPEC+ intervention will likely be required beyond 2024 to ensure a balanced market and for oil prices to remain at or above Saudi Arabia’s fiscal breakeven range.

 “Deeper oil production cuts in 2Q and 3Q, including an additional 1 mmbpd cut by Saudi Arabia, a move intended for July, has been extended to the end of 2023. The cuts could see Saudi Arabian crude production fall to 9 mmbpd for much of 2H 2023 with uncertainty over when production will be restored. Supply additions, especially in the latter years of the forecast, remain at the pre-sanctioning stage, which represents a downward risk to expected output, especially if prices drop below $60/bbl.”

Many countries around the world, including Australia, are seeing gas as a solution to the double whammy of energy security and sustainability. In lieu of this, the Australian government’s Future Gas Strategy consultation paper emphasizes the urgent need for investment in new gas supply to avoid future shortfalls and underpin the net-zero transition in Australia and the region, kick-starting an important process in planning future gas supply to ensure energy security and affordability for households and businesses.

The paper also reveals a new analysis, which shows that future gas demand will outstrip supply in the East and West Coast gas markets in 2034 and 2032, respectively. Australian Energy Producers’ Chief Executive noted that the paper recognized the growing role of gas not only as a partner to renewables in electricity but also as a feedstock to Australian manufacturing and industry. It also acknowledged the need for carbon capture, utilization, and storage (CCUS) technology, and the importance of gas exports to Australia and the region.

Samantha McCulloch, Australian Energy Producers’ Chief Executive, stated: “Gas is the safety net for our energy system and the key to providing reliable and affordable energy to households and businesses as we transform for net-zero. The paper underscores the urgency of supporting investment in new gas supply to avoid shortages. This must include a focus on ensuring regulatory approvals processes that are robust and efficient.”

McCulloch, who said it was important for the new strategy to examine CCUS as a solution to decarbonize gas production and hard-to-abate sectors and the emerging opportunities for low-carbon hydrogen, is adamant that “the gas industry’s roles in CCUS and low-carbon hydrogen will be drivers towards net zero.” Australia’s oil and gas sector claims that strong future LNG export earnings underscore the need for regulatory certainty in areas such as project approvals to encourage new gas supply investment.

The recent Resources and Energy Quarterly September 2023 report predicts that LNG exports will total $71 billion this financial year as resources exports come off record highs to total $400 billion while LNG exports were expected to total $63 billion in 2024-25. With the competition in global LNG markets on the rise, Australian Energy Producers’ Chief Executive underlines that Australia should not miss this gas opportunity, as Qatar and the U.S. increased output and cemented their position in the market. The REQ report found oil exports would hit $15 billion this financial year, up from $13 billion in 2022-23. They were expected to record $12 billion in 2024-25.

“Investment barriers – such as the growing uncertainty over vague regulations and the logjam of approvals with the national regulator – threaten this economic windfall for Australians. To continue to produce these results, Australia must ensure an approval means an approval. Reforms are desperately needed so Australia can avoid recent cases in which approvals for two major projects – Woodside Energy’s $16.5 billion Scarborough development off Western Australia and Santos’ $5.8 billion Barossa project off the Northern Territory – were overturned,” highlighted McCulloch.

The journey towards the energy industry’s transformation may be bumpy but the industry is doing its utmost to find its groove and ensure smooth sailing towards decarbonization and net-zero goals. This is hammered home during ADIPEC 2023, as experts from across the energy ecosystem and beyond gather in Abu Dhabi from October 2-5, 2023, to address critical energy and climate challenges and accelerate innovation and solutions-oriented dialogue under the theme ‘Decarbonising. Faster. Together.‘

Featuring over 1,600+ speakers across 350+ sessions, the energy exhibition and conference opens doors to discussions about tackling energy security and affordability, the need to mobilize investment, and the policies needed to accelerate the energy transition. It also puts a greater emphasis on the need for sustainable green finance progress, particularly in developing countries, where investments in hydrocarbon projects still support the national economy and provide access to electricity, power, and other much-needed resources to the population.

While reducing emissions to meet international and sectoral decarbonization commitments poses a huge challenge to energy companies and heavy industries, sessions at ADIPEC 2023 indicate that progress will mostly be dependent on collaboration and joint action. This energy conference also explores the critical role of the oil and gas industry in the energy transition, the progress of the global stocktake, and how the energy system can influence the debate around commercially viable climate solutions.

Suhail Bin Mohamed Al Mazrouei, UAE Minister of Energy and Infrastructure, outlined: “International collaboration is crucial to addressing energy challenges. ADIPEC serves as an ideal platform to take the collective decarbonization drive to the next level, and we are happy to share our experience with other countries. Having one of the fastest-growing clean energy industries in the world, the UAE is set to generate a total capacity of 19.8 gigawatts of clean energy by 2030.

“In addition, the UAE seeks to become a leading producer and supplier of low-carbon hydrogen, working towards producing 1.4 million metric tonnes of low-carbon hydrogen per annum by 2031 and 15 million metric tonnes per annum by 2050.”

This content is available after accepting the cookies.

Change cookie-settings View on Twitter.

The ADIPEC Opening Ceremony included a ministerial panel on the subject of ‘Fast Tracking the Energy Transition: Innovative new policies and a more inclusive approach,’ which brought together Suhail Mohammed Faraj Al Mazroui; Haitham Al Ghais, OPEC’s Secretary General; Dr Alparslan Bayraktar, Türkiye’s Minister of Energy and Natural Resources; and Sebastian-Ioan Burduja, Romania’s Minister of Energy.

Both Al Mazrouei and Al Ghais underscored the need for “a clear roadmap of where we’re going, and how to get there” during the energy transition journey. Al Mazrouei also emphasized the UAE’s aim to triple its renewable energy capacity by 2030. During this meeting, Burduja spoke about Romania’s achievements and ambitions for the global energy transition.

This content is available after accepting the cookies.

Change cookie-settings View on Twitter.

At ADIPEC, participants shared their insights on the latest gas and LNG market dynamics, what they would mean for future energy supply, and the role natural gas would play in the energy transition and beyond. Aside from this, the conference also showcases the discussions about policies and reforms expected in the hydrogen sector and how new and existing collaborations are strengthening the pathway to net-zero emissions via a resilient hydrogen economy.

While the entire program at ADIPEC 2023 is very impressive, the views expressed by BP’s interim CEO, Murray Auchincloss, about the optimism he sees in the pursuit of oil and gas alongside energy transition aspirations caught our attention, as he claims that it is aligned not only with the wants of the company and its shareholders but also the countries in which the UK-headquartered giant operates.

This content is available after accepting the cookies.

Change cookie-settings View on Twitter.

This conference is taking place less than two months before the UAE welcomes global leaders for COP28, thus, it brings to the fore the diverse challenges and needs of different energy markets and serves as a platform for the energy players to show their commitment to curbing emissions while stepping up investment into new technologies and clean energies.

During his speech at ADIPEC 2023, Dr. Sultan Ahmed Al Jaber, COP28 President-Designate and UAE Minister of Industry and Advanced Technology, said: “This industry can and must help drive the solutions. For too long, this industry has been viewed as part of the problem, that it’s not doing enough and in some cases even blocking progress. This is your opportunity to show the world that, in fact, you are central to the solution.”

TotalEnergies certainly seems to have heeded this call, as another announcement, which could not go unnoticed, came from the French giant. According to its Chairman & CEO, TotalEnergies has earmarked $40 billion for green energy and decarbonization over the next six years. Patrick Pouyanne further points out that companies like TotalEnergies have what it takes to be “major participants of” the low-emission future but the finger-pointing is turning the industry into a scapegoat for climate change.

This content is available after accepting the cookies.

Change cookie-settings View on Twitter.

Moreover, Wael Sawan, Shell’s CEO, explained: “We continue to polarize the debate, more rather than actually converge, given that we are trying to solve arguably the world’s biggest problem. But it’s also the best of times because despite all the negative rhetoric, if you look at what the world has done over the last few years and the significant uptick in investment in both low-carbon and conventional energy, it’s been good. We are nowhere close to where we need to be, but we should not lose hope, we should actually build on the hope.”

While discussing ‘Actions for a net-zero world: solving the current energy trilemma,’ Vicki Hollub, Oxy’s President & CEO, said: “The biggest challenge harder to address than the innovation around technology is just getting people to trust our industry, to understand what the data really says. Right now, there’s a lot of misinformation out there that’s driving some wrong conclusions.”

This content is available after accepting the cookies.

Change cookie-settings View on Twitter.

While Eni’s CEO, Claudio Descalzi, highlighted that oil and gas players should not be seen as “the enemy of the energy system,” Tengku Muhammad Taufik, Petronas President & Group CEO, said: “There’s a mandate to not only provide for energy security, we’ve got to step up to the plate and prepare to decarbonize systems of the future. Can you keep everyone happy? If you want to keep everyone happy, sell ice cream. We have to make some tough decisions and we have to be bound by facts, rationality, practical steps, but we will get there. Everyone has to commit to this step up, or fade away.”

Additionally, Francisco da Costa Monteiro, Timor-Leste’s Minister of Petroleum and Mineral Resources, outlined that developing countries cannot ignore their oil and gas resources in the face of great development needs, thus, they try to make a compromise by attempting to integrate clean energy in their energy mixes while working to decarbonize their oil and gas operations.

https://youtu.be/3TwSjyTRwic?feature=shared

Last but not least, Herbert Krapa, Deputy Minister for Energy of Ghana, spoke at the ADIPEC 2023 ‘Ministerial Panel: The road to COP28: sustainability and an equitable transition’ about African nations’ need to receive support in the form of technology, innovation, and investment if they are going to achieve secure and stable energy.

“What you find is really missing in this conversation is finance. How is Africa, which is contributing less than 5% of the emissions that are causing the globe to warm to the levels that are causing the crisis that we are facing, going to be able to finance the transition? We need to continue to drive home the point that asking developing economies to stay put on hydrocarbon resources and transition to cleaner sources of fuel urgently requires clean and improved technologies and investment,” concluded Krapa.

This content is available after accepting the cookies.

Change cookie-settings View on Twitter.

Anders Opedal, President and CEO of Equinor, which is convinced that energy players that want to have a future need to embrace low-carbon solutions along with clean and renewable energy, explained at ADIPEC 2023 Strategic Conference session ‘The reinvention of new asset and portfolio models: the renaissance of resilience:’ “With the world moving towards a net-zero future, there is no way you will be a relevant company in the future if you only produce oil and gas.

“You need to add the low-carbon energy… It’s about making sure you don’t only have one pillar to rest on business-wise… And also making sure that your future portfolio over time produces less and less CO2 while you deliver energy to your customer. That will build resilience in the future.”

Hydrogen is also expected to put the wind in the energy industry’s decarbonization sails with estimates indicating that it could account for up to 18% of annual worldwide emissions reductions by 2050. The European Commission’s ambitious goal of producing up to 10 million tonnes of hydrogen by 2030, puts the spotlight on hydrogen’s potential in heavy vehicles and international shipping. In spite of this, challenges like the nascent infrastructure for hydrogen fueling stations and the higher costs of hydrogen fuel cells compared to traditional engines still persist.

Therefore, the development of hydrogen demand centers in key areas, such as industrial applications, transportation, energy storage, and power generation, is perceived to be imperative for the further growth and adoption of hydrogen as an accelerant of the transition to a low-carbon energy system.

This content is available after accepting the cookies.

Change cookie-settings View on Twitter.

In a bid to shed more light on these opportunities and challenges, the ADIPEC Hydrogen Strategic Conference discusses the role of hydrogen in global economies, the latest technological breakthroughs, near-term and long-term strategies, and the actions required to scale the hydrogen economies of the future. During a session titled ‘Scaling up green hydrogen,’ Francois Dao, VP, Middle East & Africa, EDF Renewables, underlined that the Middle East and North Africa’s rapidly developing green hydrogen sector was likely to create many jobs.

Dao added: “We have been working in the Middle East and North Africa region for some time now with renewable projects, wind as well as solar. Going back to localization and human resources, definitely, green hydrogen projects will bring jobs to the region, perhaps hundreds or thousands.”

In accordance with these views, Stephan Gobert, VP, Hydrogen-AMEA, ENGIE, remarked during the same session that the Middle East’s abundant solar energy placed it well to produce competitive green hydrogen and elaborated: “Cost competitiveness is unfortunately what we hear every day when we are developing green or renewable hydrogen projects… At Engie we are targeting two types of hydrogen opportunities.

“One is where hydrogen will bring flexibility in a means of storage to the grid, where you have an open market. The other is where you try to compete with existing fossil-based molecules. This is where the Middle East context is playing because we are in a great location with abundant and affordable renewables.”

This content is available after accepting the cookies.

Change cookie-settings View on Twitter.

During the ADIPEC 2023 Strategic Conference session called ‘Navigating energy and geopolitics in the new world order,’ Joe McMonigle, Secretary General of the IEF – International Energy Forum, explained that the long-term legacy of the United States Inflation Reduction Act (IRA) would be the development of new clean energy technology.

“What I think is going to be the legacy of the IRA is in the development of new clean technologies, not the deployment of renewables, as that was going to happen anyway… It’s in this clean energy – CCUS, hydrogen, and things like that – creating these new technologies that, by the way, will be transferable to places like India, Africa, and the developing parts of the world. I see that as the legacy of the IRA and what’s going on,” said McMonigle.

Even though some frown upon more oil and gas projects, demanding a swift end to fossil fuels and a rapid shift to renewables, others warn about the growing divide in the energy transition journey while lobbying for a more diverse energy mix, which entails oil and gas alongside renewable energy and other low-carbon sources to meet the rising demand and ensure the security and sustainability of the future energy supply.

One of these is Aramco’s CEO, who believes the world needs all the energy solutions it can get its hands on, including oil, gas, solar, wind, nuclear, and hydrogen to meet growing energy demand and avert – what he deems as – a more serious energy crisis while also avoiding a North-South transition divide.

While highlighting the need for “the continued deployment of new energy while recognizing the continued need for conventional energy,” Amin H. Nasser, Aramco President & CEO, called on others to reunite around “a more robust transition, with winds of realism in our sails, reflecting the multi-source, multi-speed, and multi-dimensional approach.”

Therefore, as calls for more oil and natural gas and a phase-out of fossil fuels grapple for dominance on the global scene, energy security and sustainability continue to imbue the energy agenda, putting an emphasis on the need for all types of sources of supply, including oil and gas along with renewables and other low-carbon sources to meet the growing energy demands of the future.

However, these views are challenged by the International Energy Agency’s updated Net Zero Roadmap report, which underscored that there was no room for new oil, gas, and coal beyond operating fields and mines for 1.5ºC. The updated pathway to net-zero by 2050 also charts a faster phase-out of natural gas, as the IEA has cut its projection for gas demand in 2050 by almost half, compared to its 2021 scenario. Within the updated net-zero scenario, a huge policy-driven ramping up of clean energy capacity is expected to cut fossil fuel demand, making it 25% lower by 2030, and reducing emissions by 35% compared with the all-time high recorded in 2022.

This content is available after accepting the cookies.

Change cookie-settings View on Twitter.

Bearing this in mind, fossil fuel demand is forecasted to fall by 80% by 2050. However, the agency still points out that continued investment is required in some existing oil and gas assets and already approved projects. In the IEA’s view, sequencing the increase in clean energy investment and the decline of fossil fuel supply investment is “vital” if damaging price spikes or supply gluts are to be avoided. In addition, the updated roadmap reduces its projections for CCS deployment in 2030 by around 40% compared to the original NZE scenario.

The report shows that driving down greenhouse gas emissions from the world’s energy sector to net-zero and limiting global warming to 1.5 ̊C remains possible due to the growth of key clean energy technologies, but the momentum behind the pivot to greener energy still needs to increase rapidly in many areas. In the new zero pathway, global clean energy spending will rise from $1.8 trillion in 2023 to $4.5 trillion annually by the early 2030s.

Despite the IEA’s latest update, many still think that the world needs an energy strategy that features natural gas as a key ingredient along with renewable energy to come to grips with climate and energy challenges.