Written on 11 May 2020 by Flame Conference 2016
Nothing is certain in an uncertain world; especially when oil and gas markets are involved. We asked our panel at Flame 2016 to talk through their predictions for global supplies and infrastructure needs in the years ahead.
For Klaus Reinisch, CEO of Petronas Energy Trading, there is still opportunity in a period of flat demand, but realising that opportunity means working together as an industry: “For us Europeans, the answer is simple, we ought to be global.
“The way forward to make money and make sense of the European gas position is to take a global position, be in the global LNG game in order to take advantage of the surplus of LNG that is coming… and that’s where the opportunities lie in the near term.”
Gas-fired generation, bunkering, and transportation growth is not going to happen by itself, says Reinisch. “If we believe that growth will be there we need to invest now in this down-cycle. Sitting back and letting it happen just won’t work.”
There was agreement on this need for the market to be encouraged and built from Thierry Trouvé, CEO of GRTGaz. Trouvé believes that if we are to see strong growth by 2025 then the industry must focus hard on the marketing of gas and the growth of ‘greener gas’ in the market.
The supply future
Víctor Tuñón, Executive Director, Gas & LNG Supply at Union Fenosa Gas fully believes that LNG supply will grow in the next few years, helping to bring more security of supply to the industry and thus potentially drive increased demand.
“With security of supply, with LNG that can go anywhere in the world, I think we will discover new countries and new companies buying gas that maybe today we don’t expect to do so.”
The gas market is now truly globalised – each and every location has a part to play, Klaus Reinisch told the Flame 2016 audience, including Russia as a supplier to the European market.
“Europe needs Russia as much as Russia needs Europe- it’s a common interest,” added Elena Burmistrova, CEO of Gazprom Export. “We really feel quite confident [about our supply levels in 2025]. We can compete and we are really confident that we will win and will not lose our position.”
Burmistrova is confident that pipeline gas will always have a place. Being the closest neighbour to most of the European countries means it is inevitable that Russia’s position as a supplier will be maintained.
A new infrastructure vision
In terms of the need for substantial investment in new infrastructure, Thierry Trouvé pointed out that utilisation rates in pipelines across Europe are almost at over-capacity and there is very nearly an over-capacity situation for underground storage and for regasification facilities.
But that does not mean that there is no need for any investment, says Trouvé: there are still some parts of Europe where additional resources are needed both for security of supply or for better competition regions, for instance in the South East and the Eastern parts of Europe.
He added: “The market is waiting for the TSOs to optimise the use of current infrastructure…and to build new infrastructure only if it is necessary.”
Mr Trouvé believes there is still a need for more clarity from the European Commission: “We need a more stable regulatory framework which gives more stability to the market operators. We don’t yet know what the rules will be for the building of new infrastructure in Europe today; the risk of building future stranded assets is high.”
One of the major – private - infrastructure projects that is already in place is the Nord Stream 2 twin pipeline system, bringing natural gas from Russia into Europe.
“There will be competition in the coming years between LNG and Russian gas to replace declining local production. I think it’s our duty to organise fair competition between those two sources and to do that we need reliable routes,” said Thierry Trouvé in defence of this new pipeline.
If the future is one of growth, then Klaus Reinisch believes we need more flexibility across all areas of infrastructure in the gas value chain. “If you’re going to supply the new gas fire generation, if you’re going to supply transportation fuels, bunkering… these need different infrastructure. I think this is the right time to invest.”