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Abu Dhabi, UAESaturday 23 March 2019

Why natural gas is the fuel of the 21st century

Natural gas-supplied power generation can rapidly cut greenhouse gas emissions and transform the world’s energy mix

LNG tanker Stena Blue Sky is seen at the new liquefied natural gas terminal owned by Chinese energy company ENN Group, in Zhoushan, Zhejiang province, China. Reuters
LNG tanker Stena Blue Sky is seen at the new liquefied natural gas terminal owned by Chinese energy company ENN Group, in Zhoushan, Zhejiang province, China. Reuters

Heavy storms, brush fires and other extreme weather events are putting the effects of greenhouse gas emissions into stark focus and causing increasing concern over climate change. In December, the National Climate Assessment, issued by several US federal agencies, estimated that greenhouse gas emissions are already leading to rapid climate change which will only grow in severity in the years to come.

Oil and gas producers have found themselves at the centre of this issue, unfairly framed as willingly selling a product that is harming the world as if they were tobacco companies. Public pressure to cut down on greenhouse gas emissions and reduce demand for oil and gas has caused many oil companies to shift business strategies and look to diversify as reserves are re-priced and investors question their underlying value.

Renewable energy from wind and solar power is widely pitched as the solution to global warming. However, in almost every future projection of energy markets, renewable energy remains just one small part of the overall mix. That is primarily due to the intermittent nature of renewable energy sources and the lack of a viable storage solution, as well as to the upfront cost of renewable energy. Every estimation and model for future energy demand puts hydrocarbons at the centre of the energy mix for decades to come, with renewables accounting for only 17 per cent by 2040, according to the International Energy Agency.

But the switch to natural gas from coal and oil for baseload power generation could result in the kind of quick emissions reductions needed to have a definitive impact on the global carbon footprint, while supporting the transition to more renewable forms of energy. Natural gas offers an affordable baseload source of power at half the CO2 emissions of coal and none of the harmful particulate or Sox emissions. Gas is also globally abundant, diversely located and already meets around 20% of global energy needs and can be quickly scaled up.

On the one hand, major developing economies like China and India still generate the largest portion of their power from coal, with tremendously high carbon content per kWh of power and pollution. On the other hand, the switch to natural gas as a baseload fuel for power generation promises a rapid cut in carbon emissions and improved air quality.

Nations that have already switched away from coal to gas have been able to show a considerable drop in emissions, reducing CO2 emissions by up to 20 per cent in the transition. In the UK, for example, the switch away from coal to gas-fired power —coupled with efficiency improvements and other policy changes — brought carbon emissions down to levels last seen in 1890. And the recent rise of shale gas displacing coal for power generation in the United States has led to the lowest carbon emissions in a generation.

The oil and gas industry will also need to make improvements. Energy companies must redouble efforts to prevent methane leaks in their operations; methane released in the atmosphere has 25 times greater impact than CO2 over a 100-year period. Equally important, energy companies must work to ensure stronger distribution infrastructure and reliable supply to promote more widespread gas adoption, while governments must encourage higher efficiency of energy use in all sectors of the economy.

Still, by encouraging the switch from coal to natural gas in countries such as China, India and Indonesia, together with the addition of renewables and efficiency improvements, major carbon emissions could be cut for the first time in decades. Gas penetration remains low, particularly in Asia, presenting a major opportunity, while growing power demand promises to encourage the development of more efficient gas-burning power plants. Gas can also replace oil in sectors ranging from transport to shipping, while serving a supporting role for renewables because gas turbines can be rapidly brought on-line when solar or wind power is unavailable.

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To commemorate the ten-year anniversary of production operations in the Kurdistan Region of Iraq, Crescent Petroleum and Dana Gas, as operator of the Kurdistan Gas Project, and their partners in the Pearl Petroleum consortium enlisted the help of PwC to assess the wider socioeconomic and environmental benefits enabled by the project. The study, which will be unveiled at the Global Energy Forum in Abu Dhabi on Saturday, found that the natural gas we produce, fueling 80 per cent of the electricity generated in the KRI, contributed between $10.7 billion (Dh39.2billion) and $18.3billion to the KRI’s GDP by delivering reliable and affordable electricity to the region while creating thousands of jobs. The gas we produced was also found to have helped the region avoid 29 million tonnes of CO2 equivalent over the decade by switching away from diesel to gas generation, saving the Kurdistan regional government $19.2bn in the process.

Figures like these underscore why natural gas has become so important to the future of many countries in our region as they seek to meet growing power demand and reduce their carbon footprints. The Mena region as a whole has nearly half of global gas resources. Almost every government in the region is looking to buttress its gas supplies, much of it for internal consumption as natural gas becomes synonymous with electricity generation and fuelling industry for economies with growing populations and energy needs. The UAE’s announced national energy strategy wisely targets that by 2050 the power generation needs of the country will be supplied about 40 per cent each by natural gas and renewables.

Policymakers around the world will continue to grapple with slowing, if not reversing CO2 levels. To be truly sustainable, energy solutions must be affordable, reliable and scalable, while contributing to lowering global carbon emissions. And oil and gas companies must confidently show the way forward and embrace their role as central players in the debate. In a rapidly changing world, this must be approached as an opportunity and not a threat. The future of the industry, and indeed that of sustainable energy supply worldwide, depends upon it.

Majid Jafar is chief executive of Crescent Petroleum and board managing director of Dana Gas PJSC

Updated: January 9, 2019 05:30 PM

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