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Gas: the bridge to a low-carbon future

Natural gas has an important role to play in the transition to a low-carbon economy, but it must be combined with carbon capture and storage, writes UK energy minister Lord Hunt

WE LIVE IN an interdependent world and we're seeing this today on so many levels – not least because of the problems caused by the global recession and climate change. Both will directly affect the security of our energy supplies and our future demand.

As the make-or-break summit in Copenhagen approaches, it is clear that climate change must be factored into all of our energy futures. If not, we fail not just ourselves, but future generations.

The gas industry can't afford to ignore the impact of climate change – on both supply and demand. It is a global business, based on shared interests and mutual dependence.

Two thirds of our emissions come from energy use, so addressing the energy we use is a core part of making the transition to a low-carbon future. The UK's Low Carbon Transition Plan is our country's blueprint for change. It sets out how we will deliver our emissions targets, by driving forward the development and expansion of a more diverse, low-carbon energy mix. Natural gas will fuel this transition, helping to ensure security of supply. We won't be able to function without it. Gas will be needed to balance out the intermittency of other renewable forms of energy, such as wind power.

At present, 45% of UK electricity is generated by gas-fired power plants. By 2020, renewable electricity generation will have grown five-fold, making gas and renewables the main planks of the UK electricity-generation mix, with one-third each. New nuclear capacity and coal with carbon capture and storage (CCS) will also have an important role to play.

The UK position – supplies and imports

The gas and oil industries are extremely valuable to the UK economy. They support more than 400,000 jobs, both directly and indirectly. The UK still receives two-thirds of its gas from its North Sea reserves. But these are declining. As a result, the government is encouraging new exploration and development activities, and offering incentives designed to attract investment: this year, we introduced a Field Allowance to incentivise development of small or technically challenging fields.

The government is also supporting the development of gas-industry expertise through initiatives such as our government and industry Pilot taskforce. With such a mobile global workforce, this can help improve the efficiency of the industry and secure supplies, globally as well as in the UK. Indeed, many UK companies are at the leading edge of providing the solutions the gas industry needs – smart metering, secure gas storage, carbon capture, reservoir analysis, gas processing, advanced pipeline and network engineering for example.

At the same time, we know we will need to import more gas in the future. In the last 10 years, import capacity has increased five-fold. But we need further expansion of both import and storage infrastructure.

The UK's gas-import requirements illustrate the scale of investment required globally to maintain supplies. Because gas is such a vital part of our future energy mix, it's in everyone's interest to ensure we have the right infrastructure and investments in place to harness supplies for the long term.

This is difficult in the face of falling demand. But we cannot afford to delay these necessary investments. The UK government is taking this approach and wants other producers to do likewise.

Like all forms of business, the gas industry must continue to evolve. And we need to do this together – demand for gas is rising and consumer countries are laying the foundations to enable increased imports. By the same token, there are countries that rely on income from gas production to underpin their economies. Consequently, our interests are mutual – we are dependent on each other. So the question is how can this interdependence be managed most effectively?

It must be centred on the industry. Governments can set the framework, but industry makes the market work. From the perspective of a consumer nation, supply security comes from supporting the development of a liquid global market, one that spreads the risk of disruption to our supplies; this may eventually include disruptions caused by the effects of climate change.

This liquid market should comprise long-term contracts backed up by short-term trading, to cover unforeseen events. It should also enable producers to have certainty of demand in order to underpin the necessary investments, but allows them to gain value from gas volumes sold on the spot market. The liquefied natural gas (LNG) market in particular is already driving this change and it offers us flexibility on a scale not seen before.

Efficiency is also a crucial part of the evolution needed to remain relevant in a low-carbon world. The gas industry is already taking a leading role here: Qatargas 2, for example, has achieved a 50% increase in performance compared with any other LNG-export project. It is engineering breakthroughs such as this that must be learnt from, replicated and driven still further throughout the gas industry to gain the maximum efficiencies possible.

At the same time, I applaud projects such as those being led by the World Bank, to reduce the amount of gas being wasted through unnecessary flaring.

The gas industry can, and must, be part of the global solution to climate change. But while gas is regarded as a relatively clean fuel, we must try to clean it up still further, which is why the UK backs the development of technologies such as CCS. If we fail to take action, gas will simply be part of the problem.

 

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