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Shell's Voser: Governments must legislate to boost gas market

NATURAL gas can displace coal and slash global emissions, but governments must enact new policies to support the market, according to Shell's chief executive, Peter Voser

An upstream revolution has yielded centuries of potential natural gas supply, but unless the market grows, helping to boost global gas prices, companies will be discouraged from developing new reserves, Voser told a gathering of energy executives in Montreal. "The supply will be there, provided there's a market."

Carbon markets that deliver "robust carbon prices" and boost investment in low-carbon technologies are key, he said. But an "alternative approach" would be to introduce emissions-performance standards for power stations. "If well-designed, these standards would also stimulate low-carbon electricity generation."

And Voser warned lawmakers not to "pick technology winners and losers" – a reference to moves by some governments to subsidise new renewable-energy technologies. Such a strategy causes "higher electricity bills for the same level of emissions", Voser said.

However, governments ought to provide "targeted support" for carbon capture and storage (CCS) projects, "because CCS projects of themselves don't bring in revenues. We need to advance CCS fast, to allow it to realise its full potential in tackling carbon dioxide emissions in the next decade." Governments must extend their financial support of CCS demonstration projects to make this happen, he said.

Like others in the natural-gas business, Voser has the coal industry in his sights. Coal-fired electricity generation accounts for 80% of the emissions from the power sector in the US, he noted. Yet if the country were to double the utilisation rate of existing gas-fired capacity, this would displace nearly 20% of theses emissions, "at little or no additional cost". In both Europe and North America, the utilisation rate of existing gas-fired power plants has been around 40%, leaving significant spare capacity.

Basement gas prices in the US, meanwhile, would continue to bring "significant" coal-to-gas displacement this year, Voser predicted. And as older coal plants are phased out, the application of CCS technology to newer ones would drive emissions down still further. "And further out, we could add CCS to gas-fired plants, to bring their emissions down to nearly zero."

Meanwhile, Voser said Shell would continue to invest in new unconventional-gas developments to meet surging global gas demand which the company believes could rise by 25% in the next decade. China and the Middle East would dominate demand growth, he said.

Although unconventional-gas production would not take off in Europe before 2020, he said, in China, Shell hopes to develop "very large" tight-gas and shale-gas resources. Shell already operates the country's Changbei tight-gas field. The company is also investing in unconventional plays in South Africa, Australia, Germany and Sweden.

While North America no longer has a "structural need" for liquefied natural gas (LNG) imports – because of the sudden shift in supply yielded by new unconventional-gas production – new markets for LNG in Thailand, Pakistan, Singapore and elsewhere in Asia will soon emerge, Voser claimed. Supplies will rise to accommodate these new buyers. Voser predicted global LNG output, which is growing at 6-8% a year, could supply 20% of the world's gas demand by 2020.

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