At Gastech, many see growth of gas through mid-century

(Houston, Texas) — Speakers at Gastech in Houston routinely described renewable energy as “unreliable” or “unstable,” and not able to handle growing energy needs or the industrialisation of developing countries. Save for a few dissenting voices who questioned their upbeat forecasts, attendees saw gas supply and demand as growing inexorably through mid-century.

Renewable energy is “not very stable,” Yumiko Yao, executive officer at Tokyo Gas, said on one panel. “A realistic energy transition scenario is important,” and LNG has to be a part of that, she said.

“Renewables aren’t that reliable,” said Jane Lao, VP of CPC Taiwan. “Natural gas will be our only option.”

“When it comes to power generation, we see that intermittent renewables production needs to be balanced by dispatchable power,” said Carsten Poppinga COO of Uniper. “As we exit coal, it needs to be replaced by gas-fired power plants, essentially.” He called for new gas-fired power plants to be built, and to have them be “hydrogen-ready” so that after 8 years or so, the plants could switch over to hydrogen.

At Gastech, Uniper announced that it agreed to buy 10 billion cubic metres of gas from ConocoPhillips. The deal will last 10 years, and financial details were not disclosed.

In Indonesia, gas production has been in decline, which will force the country to increasingly turn to LNG. The supply shortfall in Indonesia will be triple current levels by 2025, said Dimas Haryo Dito, deputy director of business development at Indonesia’s Perusahaan Gas Negara. “We have no other option but to enter the LNG business.”

“Demand growth is approximately 3 percent per year” in Indonesia, he said. “We want to make sure the supply is available.” But, he cautioned, “we are very sensitive to price.”

Gas producers and exporters consistently look to China as the largest and most important source of future growth.

“Natural gas is less than 10 percent, and coal is 60 percent, so just think about all forms of energy needed to replace coal,” said Tze San Koh, president of China gas marketing at ExxonMobil. “The role of natural gas cannot be underestimated, and local production is insufficient.”

“Natural gas is here for the very long term,” said Tania Ortiz Menaz, president of Sempra Infrastructure, which is building LNG export terminals on both the U.S. Gulf Coast and Mexico’s Pacific Coast. “There is pent up demand” in the Global South, she said. “There is an enormous market out there that has yet to be served, yet to be developed.”

When asked what the gas market will look like in 2050, Nick Dell’Osso, CEO of Chesapeake Energy, said: “More than it is today.” Other panelists nodded in agreement.

Doubts over LNG

Even as some speakers at Gastech downplayed the role of renewable energy, at times characterising solar and wind as a sort of junior partner in the energy transition with gas at the forefront, new data shows that solar is experiencing an astonishing level of growth, particularly in China.

The world is on track to install 593 gigawatts of new solar in 2024, surpassing industry forecasts, and an expansion of 29 percent over last year and up 86 percent since 2022, according to new data from Ember.

More than half of that total is concentrated in China, which could install as much as 334 GW this year. China also continues to lean on coal, which is cheaper than gas. The result is that LNG is having trouble penetrating the power market in China. 

Meanwhile, a flood of cheap Chinese solar panels are finding their way to other parts of the world. As the FT reported, Pakistan is in the midst of a utility death spiral as people install distributed solar at a record clip because grid power is too expensive. LNG imports are declining because costs are too high.

If LNG is going to meet forecasts, it’s going to need to be “a winner” in power generation, said Michael Stoppard, global gas strategy lead and special advisor at S&P Global Commodity Insight. But as Gas Outlook reported, that is precisely the market segment where LNG struggles, due to high costs and cheaper alternatives.

Rodrigo Vilanova, chairman of Galp Trading, an energy trading company, was the lone voice of concern on his panel, pushing back on the consensus that LNG’s strong growth rates are inevitable. 

“Being at a gas conference, it’s great to hear everybody saying that gas is here to stay, gas forever, gas is good. But we’re actually doing a very poor job outside of the industry,” he said.

Echoing a common refrain heard at Gastech all week, he reiterated that gas needs to demonstrate three overarching qualities — it needs to be reliable, affordable, and clean.

“I said that a year ago, I have to say it again. Because I don’t think we’re any of that at the moment.”

He referred to Galp’s deal with a U.S. LNG exporter, which has been exporting for over two years and shipped over 400 cargoes. “We have yet to see the very first cargo delivered in that contract. Is that reliable?” he said. He didn’t mention Venture Global by name, but Galp has been one of several big energy companies involved in a highly contentious legal battle and contract dispute with the American LNG company.

Vilanova went on to describe “demand destruction” in Europe because of how expensive gas has become in recent years. “Combined-cycle power plants that are disconnected from the grid. Cogeneration plants that aren’t running. Industries that are running away from Europe. Is that affordable?”

He finally questioned the “clean” credentials that his colleagues in the industry promote. “We say that we are better than coal. Is that enough? Really?” Vilanova said.

He ended by warning his peers in the industry. “There is significant risk when we talk about fundamentals — demand destruction quicker than we believe if we don’t tackle those three points.”

“The door is closing. There’s still time to change.”