From June 1 through 5, the who’s-who of the global natural gas industry met in the City of Lights. The World Gas Conference is organized by the International Gas Union (IGU) once every three years, bringing together several thousand representatives from the global gas industry, researchers, and policymakers. The United States featured prominently as a major producer of natural gas during the entire event, with the Brookings Institution well represented.
The new energy posture of the United States was apparent all week, with major presentations focusing predominantly on what benefits hydraulic fracturing has brought to the country. Some of the most prominent stands in the exhibition space were occupied by U.S. companies such as Cheniere Energy and Chevron, and the CEOs of major producers such as Exxon Mobil and Chevron gave keynote speeches, hailing natural gas as a transition fuel and an enabler of lower carbon emissions in the United States. Their European counterparts from, for instance, Shell and BP called upon world leaders to make sure that a substantial carbon price would be installed sooner rather than later. A number of panels in which speakers presented research papers were dedicated to unconventional gas as well as potential exports of liquefied natural gas (LNG), along with other key U.S. energy issues.
Brookings representation at the conference
Brookings Nonresident Senior Fellow Geert Greving had, in his role as chairman of the International Gas Union’s working group on geopolitics, been closely involved in the organization of the event. He chaired multiple sessions during the week, and spoke during an interactive debate on challenges in the Arctic, flanked by Energy Security and Climate Initiative (ESCI) Senior Fellow Charles Ebinger, who laid out the U.S. government’s agenda for chairmanship of the Arctic Council.
Ebinger and I presented a paper that we had co-authored on natural gas exports from North America. The paper gives a somewhat sober outlook, estimating five to six U.S. LNG exports projects to be in the market by mid-2025, whereas Canadian exports are not expected to play a meaningful role before the end of this decade. In addition, with a global trend of oversupply emerging, it seems increasingly unlikely that new projects will find sufficient financial support to be constructed. Within North America, our research concludes that U.S.-Canadian gas trade will likely further erode, whereas U.S.-Mexican trade may further intensify.
Together with Tatiana Mitrova, head of the Energy Research Institute of the Russian Academy of Sciences’ Oil and Gas Department, I presented another paper that looks at the European natural gas mix going forward. In our study, Mitrova and I ran several scenarios such as cancelling Turkish Stream or eliminating Ukrainian gas transit, to see whether there would be major impacts on the share of Russian gas in the European fuel mix, as direly desired by many policymakers in European capital cities. Our analysis showed that in the scenarios under study, remarkably little is in fact expected to change regarding the share of Russian gas in the coming years. Even though the share of LNG, partly from the United States, is expected to gain significant market share in the coming years, these supplies mainly substitute dwindling domestic gas production. This is further incentivized as the Dutch government deals with growing popular dissent as a consequence of earth tremors linked to conventional gas extraction, and may well decide to further cut annual production quotas. Our analysis also demonstrated how sensitive several member states in Central and Eastern Europe still are to supply disruptions due to a lack of infrastructure, interconnectors, and reverse flow options, which prohibit alternative supplies to flow freely to that part of the continent. We called on the European Commission to use the current debate regarding the Energy Union to address those missing links, and finally finish the long-promised internal energy market.
Last, but certainly not least, Brookings Board of Trustees member Dan Yergin gave a keynote address to the amphitheater where he urged European member states to consider hydraulic fracturing and the extraction of shale gas. He also predicted the further erosion of oil-indexed liquefied natural gas, as new supplies from the United States, which are indexed to Henry Hub spot market prices, are anticipated to enter the market and provide customers in Asia, Latin America, and Europe an alternative to the traditional model. At the end of his address, Yergin was lauded as one of the International Gas Union’s “wise men” and thanked for his contributions to the industry.
Key issues on the future of natural gas
Many speakers and participants at the conference hailed natural gas as a relatively clean and flexible fossil fuel, which can play an important role in the coming decades as the share of renewable energy expands. The keynote addresses at the beginning of the conference marked a sharp division between North American international oil companies and their peers from Europe. The latter called actively for a price on carbon, to be agreed at the 21st session of the United Nations Climate Change Conference in Paris later this year, whereas their American counterparts saw no reason to support such a call.
Of course, natural gas, too, does not come without controversy, though during this event perchance these issues were not always on top of the agenda. There was relatively little attention for ongoing controversies related to in particular hydraulic fracturing, such as induced earth tremors, water contamination, and methane leakage.
Despite that, we met with old friends, and made new ones. Taken together, natural gas provides a broad, complex, and highly relevant field of research, which Brookings aims to be closely involved in going forward. Greving, together with his colleagues at the American Gas Association, have already begun preparations for the next World Gas Conference, slated to take place in Washington, D.C. in 2018.
Thus, the first week of June was another week in the mines, as they say in the Midwest of this country—though perhaps not quite a regular week. After all, it was Paris.
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