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[The Energy Journal] Prospect of natural gas in Asia

The mode “renewable energy sources + coal” should never be recommended, because it is expensive and may backfire. In most cases, “the renewable energy sources + natural gas” is cleaner and cheaper.

/By Maarten Wetselaar, vice president of Shell

What role will natural gas play in global energy system in the future?

One possibility is that natural gas will become the pillar of global energy system. In many areas, natural gas will replace coal as the main fuel for power generation, and will be widely used in the field of transportation. And by the 30s of 21st century, natural gas may even become the energy type which takes the maximum proportion and ends the 70-year monopoly position of petroleum.

The other possibility is that, relying on the shale gas revolution of North America and its consequent influence, the yield of natural gas will keep rising. However, limited by technology and economy, the exploitable yield of natural gas will remain low. And coal will still be widely used in the field of power energy. And such situation will last till the middle period of this century.

Both of the two predictions indicate that, in the future world without good policy and innovation guarantee, the pillar position of natural gas in global energy sources in the future will not be fully guaranteed.

It is predicted by the UN that, by 2050, the world population will exceed 9 billion. People will buy their first car, first TV and first refrigerator, and more and more people will live in the city. The Asia will become an area with fastest urban population increase. 80% population of South Korea will live in the city. Almost one billion of Chinese people will live in the city. And over half of Chinese cities are now still in the primary stage of development.

Where will the energy sources required by such development come from? The proportion of renewable energy sources will increase up to about 25% by 2050. Fossil fuel still needs to provide 2/3 energy sources, and the current proportion is 80%. We need to develop all kinds of energy types to meet the increasing demands. But we should lay the emphasis on selecting the solution with optimum effect, which can increase the energy efficiency as well as tackle climate changes and air pollution.

Renewable energy sources are vital for the future. But there also requires flexible standby resources when there is no wind or sunlight. And at this time natural gas will be a great help.

Advantages of natural gas and European case
It is considered by IEA that, by the current mining rate, we still have the recoverable reserve of natural gas enough for 235 years. South Africa, East Europe, China, Australia and Latin America are countries and regions with great potential.

This means that, no matter tight gas or conventional gas exploitation, there will be more countries who have chances to exploit the potential of domestic natural gas or import plenty of LNG. This undoubtedly gives a new choice to the governments of all countries - change the consumption of coal resources into the consumption of natural gas just like coal-to-gas. Despite the difficulties, it will benefit the whole world as long as we accomplish this transformation process.

Compared with the whole power generation system, the cost of gas power generation is very competitive. The cost of gas-fired power plant in Asia is 1/2 of that of coal-fired power plant and land wind power plant, 1/4 of that of nuclear power plant and 1/7 of that of offshore wind power plant.

Another advantage is the construction speed. The construction period of gas-fired power plant is generally 24-28 months, while the coal-fired power plant takes 52-58 months and nuclear power plant takes 54-60 months. Considering the examination and approval speed of Asian countries, the period may be even longer. These factors have strong influence on Asian countries, for their energy demand is increasing rapidly.

Meanwhile, the energy and climate policy of EU will have three separate targets by 2020, i.e. the quantity of renewable energy sources, the target of energy conservation, and the CO2 emission reduction. The carbon emission allocation market of Europe is engaged in reducing the consumption of high-carbon energy sources such as coal and increasing the bearing capacity of renewable energy sources.

The result is that the renewable energy sources have greatly increased under the governmental subsidy. This should be good news by rights. But as I mentioned previously, renewable energy sources require enough standby energy sources. And unfortunately, many European countries chose the coal-fired power plant as standby instead of gas-fired power plant. From 2010-2013, the gas generating capacity in Europe even reduced by 16%. And in the next 10 years, Europe may only return to the gas-fired generation level of 2010.

The reasons to cause such phenomenon were various. The shale gas rush of US allowed the cheap American coal to swarm into Europe, and it happened to be the economic recession of Europe, which gave big market for coal. Besides, the competing relationship between the three energy and climate policies of Europe has become obvious in recent years. And the final result is that, the CO2 emission of Germany and UK even increased in 2012.

The European Commission has raised the energy and climate policy of 2030, which has done certain mending on the previous policy, however, some key problems still exist. For example, the price subsidy plan expected for long time by European countries has not been implemented yet. These problems will directly influence the target realization of emission reduction of CO2 of Europe I the coming 30 years.

The mode “renewable energy sources + coal” should never be recommended. Not only because it is expensive, but more because it backfires. In most cases, “the renewable energy sources + natural gas” is cleaner and cheaper, which means that Asia will have enough opportunities to avoid the mistake of Europe.

Prospect of natural gas in Asia
the situation of Asia seems have better future than that of Europe. Singapore and Malaysia started to import LNG since last year. And shortly afterwards, countries such as Vietnam and the Philippines will also join. Besides, the traditional LNG import countries such as South Korea, Thailand, China and India are still expanding their importing capacity.

However, if we take closer observation, there are still many problems existing in Asia actually, which makes the future of natural gas of Asian areas look just as dim as the air in Asian cities. The consumption of natural gas and renewable energy sources of Asia is increasing rapidly, but not rapidly enough. Taking China for example, natural gas accounts for less than 6% in energy supply, while coal accounts for 67%.

How to guarantee that natural gas can play its due role in Asian areas? Firstly, to strengthen the role of society and government in energy sources in the future; secondly, realize continuous industry innovation.

Government, society and different industries are playing different roles in the future development of natural gas. But they need to cooperate to meet the market demand for natural gas. International petroleum companies should constantly strengthen the exploration of natural gas and increase the yield of LNG.

The other emphasis is the innovation. There are recoverable reserves of natural gas enough for 235 years all over the world. But it is technically feasible, and it is not easy to get.

LNG and FLNG plants are starting to expand worldwide. The main natural gas production countries, such as Russia, Qatar and Australia, have arranged a large number of LNG and FLNG plants.

Besides, what is worth expecting is the new technology GTL (gas-to-liquids) technology. In 1993 Shell established the world’s first commercial GTL device in Malaysia. The Pearl GTL plant in Qatar is now the world’s largest GTL project, and has gained very good economic benefit.

The important role of natural gas in the future should not be neglected by the world. To us, it is our responsibility to guide the gas industry to the correct development direction. As participants of gas industry, what we should do is to help the whole world solve the problems of energy supply, climate change and air pollution. 

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