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Towards a Global Energy Market - LNG Review 2005
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George H B Verberg
President, International Gas Union (IGU)
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Originally printed in:
LNG Review
- 2005
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Looking at the current energy consumption around the world, it is clear that the developing areas are still far behind the developed countries. Bringing the rest of the world up to the same level as that of the moderate European consumer would more than double the required amount of energy, while taking it to the level of the US consumer, with its greater use of cars and air conditioning, there would be a need for almost five times as much energy as today. It is worth noting that China and India, together encompassing more than one-third of the world’s population, consume only 17% of the global energy. For these countries, levelling up their per-capita energy use to the world average would require the equivalent of 40 million barrels of oil per day or half of the world’s current oil production.
Demand Projections and Sourcing
Energy specialists rely heavily on the projections of the International Energy Agency (IEA), its most recent issue being the World Energy Outlook (WEO) 2004. Primary energy demand is forecast to grow by, on average, 1.7% per year (2002–2030), assuming annual growth rates of 3% for gross domestic product (GDP) and 1% for population and taking into account the slightly decreasing GDP elasticity of energy use. Of course, figures on a regional level differ from the global averages. The engines of growth are the Chinese and Indian economies, with long-term annual GDP growth of about 5%.
All this amounts to a 60% increase in primary energy demand by 2030. The industry is thought to be capable of fulfilling this demand, given technological advances and the vast hydrocarbon resources available. In fact, the industry can take pride in its performance over the past 30 years, having achieved 87% more primary energy production.
The BP Statistical Review of World Energy assesses proved reserves of oil, gas and coal as lasting about 40, 67 and 164 years, respectively, at current production rates. However, the WEO 2004 cites studies stating that undiscovered and unconventional resources are expected to more than double these oil and gas amounts. Also, ambitious gas optimists claim that nearly inexhaustible volumes accumulated in methane hydrates beneath the seabed can be exploited (Adelman M A, Lynch M C).1 Production possibilities will therefore not be a limiting factor for further growth, provided that technological developments do not slow down, investments are adequate and the political and regulatory authorities are positive towards the energy industry.
The demand for natural gas will rise more than the demand for other primary energies. With an annual growth of 2.3%, consumption in 2030 will almost be twice as high as today. Moreover, in view of the fact that gas is relatively low in carbon emissions, it is the fuel that is best suited for the transition to the era of sustainable energies.
To a large extent, gas demand is driven by the power sector, where its market share is set to climb from 19% (2002) to 29% (2030). Almost 60% of the additional gas volumes will find their way to power stations. The reasons for power generators to prefer gas are logical; from an environmental point of view, natural gas scores supremely among the fossil fuels and investment requirements and lead times for gasfired plants are very attractive.
With an oil price above US$60 per barrel (at the time of writing) and a gas price that, for good reasons, moves with the oil price, power projects that are on the drawing board could be jeopardised, because uncertainty over long-term attractive gas prices can frighten off investors. Clearly, a higher gas price means that the merit order of gas-fired power plants deteriorates vis-à-vis coal-fired generators. However, burning coal has environmental costs, unless carbon dioxide (CO2) capture and storage is developed at the same time. Moreover, in many countries, the additional costs for CO2 emission rights – to be obtained on a competitive market – make the cost gap between coal and gas uncertain. Nuclear power is being reconsidered as an option, both to meet the CO2 emission targets and reduce the reliance on hydrocarbon-producing regions. However, given the lengthy legislative procedures, this will not be a serious alternative for the short term in Europe and the US. Thus, gas will retain its position as a bridging fuel into the era of sustainable energies.
Categories:
LNG
,
Gas Processing
,
Overview & Strategy
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George H B Verberg is President of
the International Gas Union (IGU)
for the triennium 2003รข??2006. He
is also Chairman of the supervisory
board of the University of
Groningen, member of the board of
the advisory council of the ING
Group, Chairman of the supervisory
board of Ultra-Centrifuge Nederland
(UCN) NV and Vice-Chairman of the
board of Urenco Ltd. Mr Verberg is
a member of the supervisory board
of Essent NV, the General Energy
Council, the advisory council of
E.ON Ruhrgas AG, the board of the
Prince Bernhard Culture Foundation
and the supervisory board of the
Integrated Cancer Centre for
Northern Netherlands (IKN). Mr
Verberg was Chief Executive Officer
of NV Nederlandse Gasunie for 12
years until July 2004 and, prior to
this, he was its Commercial
Managing Director. He has worked
in the Dutch Ministry of Economic
Affairs as Director-General for
Energy, Director-General for Trade,
Industry and Services and General
Economic Policy Director. He has
also worked in the Dutch Ministry
of Education, Culture and Science.
Between 1970 and 1971, he
studied at Massachusetts Institute of
Technology (MIT) and the University
of California at Berkeley, having
studied general economics at The
Netherlands School of Economics of
the Erasmus University in
Rotterdam, from where he
graduated with distinction in 1970.
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