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Global gas markets in the times of instability: current trends and perspectives

At the third session of a series of webinars in anticipation of the 10th St. Petersburg International Gas Forum, experts discussed the relevance of natural gas, its current state and potential.

The gas industry is going through a difficult period, raw material prices have fallen significantly, and many modern factors are challenging the sector and its business models. Analysts note that in recent years, liquefied natural gas (LNG) has become, on the one hand, a driver of changes in the market, and on the other, has awakened many reasons for discussion. Leon Stille, General Manager of the Energy Delta Institute (EDI), moderated the webinar.

Dr Andrej Pustišekprofessor of energy economics at the University of Applied Sciences, Stuttgart, Germany and at the University of Karlsruhe spoke about the trends pursuing liquefied natural gas. He noted that the main trend in 2018 was the growth of LNG exports from both the United States and Russia to Europe, resulting in a positive growth forecast for the next periods. Consequently, the major trade movements in 2019 showed liquefied natural gas exports increasing by four times in USA andalmost three times in Russia, leading to a stable growth for the beginning of 2020 for natural gas. Nonetheless, the current situation is completely different: «NG was not hit as badly as coal or oil, but a [2020 forecast] 5% decrease in a year where it was assumed a [2019 forecast] 4% increase is considerable». Concerning prices, Andrej points out that despite the sudden plunge being experienced nowadays, there is a light at the end of the tunnel with estimations signaling a price increase up to about 5 USD/MMBtu by the end of 2020.

Moreover, there might be a positive aspect from the crisis, Andrej discuss: due to the coronavirus pandemic, even though the CO2 concentration in the atmosphere remains growing, there has been a significant drop in CO2 emissions: «NG might be favored as it is the fuel with lowest CO2 emissions […] CO2 emissions trading allowance rose equivalently from the year 2018 to these days and they might help reducing coal fired electricity production and promoting natural gas» – thinks the speaker.

As for what the future holds for natural gas demand, the speaker mentions that according to major institutions forecasts, the European demand would at best remain stagnate or even decline a bit.

The speaker is sure that natural gas can develop in Asia and North America due to the fact that there are conditions for transportation, there are pipelines and these pipelines can be used not only for transporting LNG, but also carbon. «Mostly Asian markets are developing in their own way, but they are also moving towards liberalization, and legislation is expected to be harmonized. The separation of oil and gas prices is already observed in Europe and then will become noticeable in Asia, there will be special contracts, this will be due to the growth of volatility», – points out Andrej Pustišek.

As general conclusions, Andrej emphasizes that the role of natural gas in a renewable environment has to be strengthen: «We could and we should use NG to reduce CO2 emissions instead of waiting for renewables to be developed». Furthermore, the expert points out that the NG industry should also catch up with the digitalization trend. He continues drawing attention to the «trend-to-blend», meaning that the admixing of hydrogen, green gas or other molecules should be increasingly considered.

Tatiana Mitrova,PhD,Director, Energy Center, SKOLKOVO Business School, Senior Research Fellow in the Oxford Institute for Energy Studies (OIES) and Scientific advisor at the Energy Research Institute of the Russian Academy of Sciences (ERI RAS) has devoted her presentation to global perspectives and challenges of natural gas.

Tatyana shared what is the projected gas consumption during the next two decades in the major gas consumption regions, and showed that European markets will remain stagnate or even slightly declining, while North America is demonstrating some growth. However, the major upside for the gas industry is concentrated in the Asian market.

As for the current momentum, she acknowledges: «Right now, indeed there has been a perfect storm for the global gas market». Despite not having the full statistics of the COVID19 impact, an immediate assessment by the IEA shows that the global demand for gas has fallen by about 5%, while for oil by 9%, and coal 8%. «Natural gas is suffering, but much less than other energy markets», – Tatiana Mitrova explained.

The speaker reported that at the end of 2019, markets around the world and in certain regions were already in a special situation, new supply projects were emerging, and storage facilities were filled in Europe. «The price declinewas expected, but it was not foreseenthat it would be far below the break-even price. The question arises, what will recovery after coronavirus look like? Will countries be able to switch from coal to gas? », – the speaker asked.

The Director of the energy Center of the Moscow school of management SKOLKOVO pointed out the main directions of the expected future prospects for LNG: energy transition, climate change and the readiness of countries to meet the requirements of the «Paris agreement», the transition to other fuels and geopolitics.

«We need to reduce emissions of greenhouse gases and harmful impurities, which is why we are talking about decarbonizing natural gas. To achieve zero emissions, natural gas must meet the challenges facing the sector. I think that some companies do not fully understand how quickly we need to improve, implement projects, implement technological solutions, actively inform, and not just talk. Oil and gas companies should become an integral part of a sustainable future», – states Tatiana Mitrova.

Organisers: Energy Delta Institute (EDI), ExpoForum International.

Sponsor – Gazprombank (Joint Stock Company).

Energy Delta Institute is the world’s leading energy business school founded jointly by the Dutch companies N.V. Nederlandse Gasunie, Gasterra, Shell, University of Groningen and JSC «Gazprom» from the Russian side. We offer a unique range of programmes that cover all parts of the energy value chain and all aspects of the great energy transition. For more information about Institute, please visit the website:  www.energydelta.org.

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