Gas, Rising Star of World Energy

The main point in his words was that oil, gas and coal constitute today’s world energy mix. Over the coming 25 years, he said, the world is forecast to move towards curbing oil and coal consumption; therefore, gas will be the rising star of world energy. Excerpts from his speech are cited below:

It is often said in international fora that the current period is the period of transition of energy. One may ask why. Pundits maintain such a view from several aspects. First of all, energy and gas market parameters have changed drastically. The primary change has been the change in price. Prices have now become normal. In the past, gas traded $20 in Asia and $12 in Europe. Now they have fallen respectively to $6 and $4. Therefore, the prices are normal now. Meantime, something else has also happened, that is the emergence of new suppliers like the US. Until 2005, the US was a leading importer of energy, but now it has become an exporter. US gas cargoes have arrived even in the Persian Gulf. Australia is another case in point. It was a small producer and now it has become a big one. According to projections, Australia is set to become the world’s first producer of liquefied natural gas (LNG), a position currently held by Qatar.

These new players have not only brought about changes in exports, but also transformed the important sector. For instance, Japan is the largest importer in the world now, but within years it will become be surpassed by China and India in imports.

A new atmosphere of competition has emerged in the gas market now. Gas contracts in Europe have significantly changed because Europe is attracting all exporters of LNG. GECF members can no longer stick with traditions if they want to survive in this global market.

Environmental issues and energy security supply in countries are among other factors affecting global gas market. At present, it is said that the market transition does not stem from the aforesaid reasons, but it depends on the fact that we intend to switch from a high-carbon society or economy to a carbon-free society.

I recently attended gatherings in which speakers insisted that the value of all huge hydrocarbon reserves will fall to zero soon because the world is moving towards a carbon-free society.

Growth in Energy Demand

All important relevant bodies in the world have reviewed the global economy growth three times over the past six months and they have all revised down their forecasts three times. It has fallen from 3.4 to 3.1 percent. The global economic growth forecasts have declined for the 2015 to 2017 period. There are three scenarios for the decline in these years. The two 2.8% and 3.1% scenarios respectively apply to developed, developing and emerging countries. Over the past two to three years we have not had good economic conditions; therefore, we will not witness a high economic growth rate over the coming years. Furthermore, economic growth rate in China has declined. But over the coming 25 years, the overall economic growth rate will be equal to the overall economic growth rate of the past 25 years. Therefore, we hope that this growth will lead to an acceptable growth in energy demand. Growth in population and urbanization always enhances demand. Over the coming 25 years, 1.7 billion people will be added to the world population and urbanization in the world will increase from 54% to 64%.

Energy consumption has experienced an annual 1.9% annual growth over the past 25 years, and it will grow 0.09% a year for 25 years. It does not mean that we will not have any economic growth; rather it means that a new relationship has defined itself between energy demand and economic growth. Since energy saving, productivity and energy intensity affect consumption; many countries have managed to cut their consumption by enhancing energy productivity.

Oil, gas and coal currently constitute the world energy. Over the coming 25 years, oil and coal consumption is set to decline; therefore, gas will be the rising star of the energy world. 

Balanced supply and demand will benefit supply because over the past years when gas prices have been high, many countries have invested in this sector. By applying cutting edge technology, the US has managed to extract 50% of its gas from shale rocks and it will become a net exporter of gas next year.

Gas Demand Set to Grow

In 2015, due to political reasons demand for gas grew in Europe because countries in this continent are willing to diversity gas imports. The gas market will witness better conditions in the long term and the output of gas exporting countries will increase from 3,400 bcm to 5,400 bcm. Furthermore, gas penetration rate will increase in the energy mix of most countries in the world over the coming 25 years. For instance, the share of coal will decline in China and will be substituted with gas. Therefore, the demand for gas and LNG is set to increase. Four countries will experience the highest level of demand: China, the US, India and Iran. Of some 1,900 bcm that would be added to demand, 900 bcm will be from these four countries.

There is roughly 485 tcf of gas in the world. According to BP annual reports, Iran sits atop the world’s largest gas reserves. The recoverable gas reserves in the world amount to only 191 tcf. That indicates investment in gas extraction sector in gas producing countries.

Higher LNG Trade Share

Currently, the volume of natural gas traded via pipeline, and in the form of LNG amounts to one billion tcf, and in 25 years will reach 1.7 billion tcf. That would be a big increase. During the past years, we have mainly seen growth in pipeline gas trade rather than LNG trade. But now, the ratio of pipeline gas exports to LNG trade is 70 to 30. Within 25 years, that ratio will change to 45-55. In other words, LNG will show a strong presence in global markets soon, and a very important point with regard to LNG trade is that over the coming 25 years at least 30% of LNG trade in the world will take place under no contract. As you know, there is a big difference between oil and gas. Oil must be first produced and then a contract is signed for its sale. But in gas business, a contract must be first signed and then production begins. Meantime, long-term oil contracts are signed for three years, while gas contracts are signed for at least 25 years. Therefore, in a business where long-term contracts are signed we are moving in a direction where normal demand is being created. Within 25 years, 30% of LNG will be sold under spot cargo tender, which would boost competition in the market.

Present and Future of Iran Gas

Demand for energy will treble over 25 years and the world will witness an annual 2.5% growth in demand. Our country’s energy is currently limited to oil and gas and that will continue for 25 years. The ratio of oil to gas currently stands at 40 to 58, which will change to 32-66 in 25 years. However, that does not mean ignorance of modern energies in Iran. Of course, the country’s development plans envisage up to 10% share for renewable energies. At present, demand for gas comes respectively from household, industrial and power generation sectors. In the coming years, power plants will come at the top. 

Iran is a potential major player in the world gas market. Iran is pursuing its LNG projects and “Iran LNG” project is the most important among them. The startup of this project requires a contract.

Gas, Cleanest Fossil Fuel

Some energy experts believe that the era of gas is nearing its end and we are entering the carbon-free era. We saw at COP21 that all world countries pledged to cap carbon emission to 40 giga tons a year. But for the time being, carbon emissions will reach 55 giga tons a year. If you look at greenhouse gas emissions we will see growth of other sources of energy, too.

Another issue pertains to pollution and related problems that have recently been highlighted by the World Health Organization (WHO) and the World Club of Consumers. Every year, 8 million people are dying from pollution inside and outside home. According to studies conducted on this issue, the best way to prevent such fatalities will be using renewables. Gas is the cleanest fossil fuel and produces 40% less pollution than oil. That is why we introduce this fuel as a clean source of fuel to the world, because this fuel is accessible and more affordable than other fuels. For instance last year, Europe spent 4106 billion in subsidies for encouraging people to use renewable energies.

To resolve environment-related problems, we cannot go ahead based on merely renewable energy development plans. In addition to this policy, we have to use cleaner fossil energies like gas.

The point raised During the Third GECF summit in Tehran, was to coordinate with COP21 in Paris in a bid to prevent global warming.

Fossil fuels will have a big share in the global energy mix over the coming 25 years. At present, fossil fuels constitute 80% of energy mix all over the world. In the most pessimistic scenario, fossil fuels will have a 68% share over the coming 25 years.

In the current period of transition, we have to use more gas than coal in order to combat pollution and reduce temperature. A tough road lies ahead.

 

Source: Iran Petroleum