Written on 12 May 2020 by Flame Conference 2016
The global gas landscape was assessed and analysed from every angle by dozens of speakers at this year’s Flame 2016 conference in Amsterdam.
Flame is the key annual event for global oil and gas professionals and discussion this year centred on some of the major challenges facing the LNG and gas sector today, visions for a flexible and integrated future and the role renewables will play in this.
European LNG supply
In the opening session, Andrew Walker, VP of Strategy for Cheniere Marketing, outlined the growth in LNG supply since 2010, with volumes set to increase dramatically in the near future with increasing supply particularly from Australia and the US.
The in-flow of cargoes into Europe hasn’t yet started in earnest, says Mr Walker, but it is on its way. “I believe this is a good thing for Europe; LNG will help diversify supply, competition is good, whether it’s competition between LNG and Russia or between LNG, pipe supply and domestic supply.”
This supply in-flow was the subject of much discussion at this year’s LNG summit and conference. We all accept that LNG oversupply is coming and there is a convergence of price as a result, says Luis Sánchez from Uniper Global Commodities. In Sánchez’s view, the main driver in the future will be supply from the US as much of the Australian volume is already committed.
Ignacio de Aguirre, head of strategy at Gas Natural, believes there is potential for the European market to absorb a proportion of the LNG excess and there was agreement from most that this in-flow of supply will lead to an ongoing downward pressure on prices.
Gas versus coal
In a panel session on pricing and security of supply in Europe, Mr de Aguirre discussed the potential for low gas prices to stimulate the European market demand. He believes this will be the case, especially with the current competition between gas and coal in the marketplace.
For de Aguirre, it’s not only price that will have an impact, though: the regulatory changes introduced as a result of the COP21 commitments from 2020 will also result in a shift away from coal.
There were mixed feelings about the impact of COP21 on the gas industry as a whole. Energy author and Oxford University academic Dieter Helm’s outspoken belief is that COP21 will have very little impact on the fossil fuel industry. Emissions have continued to grow since 1990, Helm told the conference, and there’s no good reason for thinking that will change. “It’s a story of achieving nothing in reducing emissions since the start date of the Kyoto framework.”
Arno Büx, Chief Commercial Officer of TSO Fluxys feels the focus must continue to be taking market share from coal: “I think for the gas sector it’s more important to choose the battle around who will replace nuclear and the base load and how to construct price competiveness with regards to coal in the EU.”
Partnering with Renewables
Renewables were represented at the conference, joining in the future energy debate in earnest. In a session on a more integrated and more renewable European energy market Giles Dickson, CEO of WindEurope, spoke of his organisation’s recent partnering with GasNaturally to submit a joint paper to the European Union with proposals for changes to the electricity market. “If the electricity market is designed along those lines,” said Dickson “then it’s better for renewables and it’s better for gas.”
Multi-nationals also were demonstrating their commitment to a wider portfolio of supply. Total’s VP Oil & Gas Advocacy, Froncois-Regis Mouton told the conference. “We invest more in gas; we are not investing in high cost oil projects anymore as we believe they will not be necessary in the future, and we are investing in renewables.”
Gertjan Lankhorst of Euro Gas believes innovation is vital in the industry, such as the integration of biogas, green gas and similar products to the gas grid. “If you do this, you don’t just reduce CO2 in terms of the amount that you use, but you also de-carbonise the fuel itself… As a gas industry ourselves we have to work on making our product greener.”
There was much discussion around the need for flexibility – and reliability – in supply in order to ensure demand can grow robustly. In the past, said Martin Jahan de Lestang, CEO of Elengy, there have been issues with the consistency of supply, and that has impacted market penetration and growth.
“You were never sure that the gas would be there when you need it,” De Lestang says. “We see that there has been a fundamental shift in the industry with a lot of flexible LNG coming on stream and representing a bigger part of the global market. We can now rely on LNG for spot optimisation.”
Opening up new markets
“I think that it’s demand rather than supply that will be our main concern – why? Because markets are shrinking as gas is being challenged by policy decisions and consumer perspectives – we as an industry urgently need to address this as it’s a serious issue,” said Tor Martin Anfinnsen, Senior Vice President Marketing & Trading at Statoil.
“I think the industry has been successful at creating more gas supplies,” added Total’s Froncois-Regis Mouton, “but now we need to be more creative and more dynamic in creating new demand.” This may be in the heating sector, in long haul transport such as trucking and also in cars.
Martin Jahan de Lestang of Elengy outlined the potential from energy bunkering and smaller volume transactions – he confirmed that some cruise vessels are ready to start using LNG and there is continued potential in truck loading. In his new role as CEO of newly-created industry giant Uniper, Klaus Schäfer spoke of two major demand drivers – generation and transport.
Other panel speakers reinforced the importance of these smaller scale projects to drive demand - Martin Layfield, Global Gas Segment Director at DNV GL, referenced the growth of small-scale distribution in India and other growth markets, as well as transport collaborations and business model innovations in the Middle East. Alain Bourgeois, VP of Gas & LNG at Bergen Energi outlined the company’s drive to grow the marine and bunker market and Boris Safner, Director of energy efficiency at BDEW, believes there is potential in the re-heating sector across Europe.