Natural gas brings flexibility to the mix

by Jozef Badida | 10 October, 2013

Interview: Georges Liens - Chairman Coordination Committee of IGU

Thanks to the Slovak gas magazine Slovgas, we are able to bring you an eye-opening interview with Georges Liens, Chairman of the Coordination Committee of the International Gas Union (IGU). Liens evaluates the current standing of natural gas and gives his views on its future position. He shares with us his opinion on the priorities of the French Triennium, what has been causing the imbalance in the European gas market over the past ten years, where we are standing in the energy transition process, how long-term contracts should be modified and what the connection is between underground gas storage and shale gas.

Mr. Liens, you have taken part in the development of the IGU and during the French presidency you play an influential role. How would you describe the organisation and its vision?

‘The IGU is a non-profit and especially independent organisation consisting of more than 120 national gas associations and corporations that represent over 95 percent of the global gas market. Our activities are financed by a modest annual budget of around 700,000 euros and sponsors like Statoil hosting the IGU Secretariat. Historically the organisation started with more technical matters and nowadays still provides a meaningful platform for the exchange of best practice and knowledge among its members.However, it also covers the whole chain of the gas business, including trade, strategies, marketing and innovations. The IGU aims to be the voice of natural gas, to be linked closer to the policy level and the relevant authorities in order to be more active in gas advocacy. Our main goal is to become the spokesperson for the gas industry worldwide.’

France is holding the presidency of the IGU from 2012 until 2015. What are your priorities, programme and contribution to the IGU?

‘Like the Eiffel Tower, the French Triennium is based on four pillars: natural gas as a fuel for sustainable development, adequate combination with renewables and electricity, opportunity to develop the gas market everywhere and last but not least sufficient human resources for the future.
We want to follow our priorities through specific work groups and task forces. The task force in charge of human capital has been mapping the situation among our members. Together with the French Presidency and in cooperation with UNESCO they will organise a seminar at the end of this year, focused on Africa and MENA to promote the gas business among the female population. Many countries and particularly the Arab ones are having trouble attracting enough people to the gas business. This goes especially for women, who represent fifty percent of the population and over fifty percent of all graduates. Other working groups are typically concerned with exploration and production or underground gas storage, well chaired by the Slovak expert Mr. Goryl. Furthermore, we are also looking to create links between the various groups. Therefore a correspondent of one group is usually member of another one too. These connections inspire new themes. And let's not forget the networking opportunities for our members, strengthening ties during our events.’

How do you see the current position of natural gas in the worldwide energy mix?

‘The natural gas business is developing worldwide – except in Europe - because it is considered to be clean, safe and growth-enabling. It is affordable and could be used in every sector (e.g. residential, electricity generation, transportation – CNG/LNG.

One of the best examples is China where natural gas has been contributing to lower CO2 emissions and less polluted cities

One of the best examples is China where natural gas has been contributing to lower carbon emissions and less polluted cities. Its demand will multiply four times in less than twenty years. Last year it consumed around 100 bcm, in 2030 it could already be 400 bcm. China uses natural gas in order to maintain its huge rate of development while creating a healthier environment in the cities.
Another good example is the shale gas revolution in North America. It is no coincidence that many European industry companies are attracted by this cheap gas and are relocating to the USA.’

So in your viewpoint abundant, acceptable and affordable natural gas as an energy source is developing worldwide, except in Europe. How would you describe the position of this “3xA” fuel on the “old” continent?

‘The European natural gas sector is featured by two peculiarities – permanent change of regulation and the green effect – both causing imbalance over the past ten years. First of all, modification of the relevant rules every three or four years provokes a lot of instability and less predictability for the future. Moreover, the current message conveyed by the European Commission says that there will be no more gas in 2050. If you construct a new pipeline you make an investment to last for at least fifty years. If you know beforehand that it will be used for less than 35 years, you may be reluctant to invest. Undoubtedly, this kind of communication discourages the market.’
Another aspect, notably present in the north of Europe, is a general thinking that natural gas as a fossil fuel should be banished. One of the reasons could also be a growing concern regarding security of supply, dependence on one or two external gas suppliers, while renewables are perceived as local and thus more secure. This may be true, but the sun does not always shine nor does the wind always blow – they are characterised by significant intermittency. Consequently, an efficient combination of natural gas and renewables could be the solution.
Nobody thinks that natural gas will be the only energy source, just that flexibility and a balanced energy mix can help us. Furthermore, each country has to adapt its energy mix individually in line with its natural conditions. “One size fits all” does not work in this case.’

The attempt to reform the ETS failed, coal is replacing natural gas, the demand side is fragmented and we have to face the delocalisation of European companies. Not surprisingly, giants like EON, RWE, GDFS or ENI are calling for a redefinition of the European energy policy. Do you agree and what is your opinion on the progress of the transition to a sustainable future?

‘One of our main goals is have an open discussion with the EU institutions and persuade them that natural gas deserves a chance. We don’t ask for subsidies just for a chance to develop!
Regarding the energy transition I think that we are still at the beginning of the game. However, this is okay; 2050 is not tomorrow. Yet five years ago nobody thought about shale gas.

Another aspect, notably present in the north of Europe, is a general thinking that natural gas as a fossil fuel should be banished from everywhere

Something similar might come up in the next five years and over forty years changes could be enormous. What we really need is flexibility and natural gas is able to provide it to the energy mix. What an opportunity! Unlike electricity, it is storable. Moreover, it is the cleanest fossil fuel and ensures back-up to “unstable” renewables. That´s why it wouldn’t be reasonable to follow just one energy source like France did in the seventies under the slogan: “All for nuclear”. One of the best examples is China where natural gas has been contributing to lower carbon emissions and less polluted cities. We have to be open-minded to all opportunities, and flexible. Flexibility is the key word and gas is flexible!’

The current trend is the adaptation in long-term contracts (LTC). Could LTC survive in Europe or could Europe survive without LTC?

‘I am not sure that they are indispensable for suppliers or final customers. On the other hand, producers need a long-term vision and without LTC they will not develop new production for Europe. It is necessary to maintain some LTC, maybe less than in the past but for the development of new fields they are required.’

Clearly, some kind of coexistence has already been in place...

‘Yes, even in the States, besides “spot” gas, there are still long-term contracts with regard to suppliers and producers. The former have to be sure to have enough gas at their disposal, while the latter require a long-term vision. Nevertheless, indexation to oil prices might be changed because natural gas is currently not competitive in comparison with other energy sources like subsidised renewables. Producers should take this fact into account. Oil is no longer a marker for natural gas and at the same time final customers don’t see the connection anymore.’

So LTC are here to stay but maybe in a modified way...

‘Most probably they will, but the adjustment of price formulas and the evolution of price levels will be necessary. A pragmatic approach requires closer affiliation to the market and for instance coal could be added as a reference point. Again, flexibility is important. Clearly, current price levels in Europe create another obstacle hindering an increase in the share of natural gas. In the end there is also a choice for producers to make, whether to keep delivering gas to Europe or not.’

The EU is quite divided with regard to shale gas. There is a visible opposition against its exploration in many countries, including France. Does shale gas deserve its chance in Europe? If so, how to improve its position?

‘This is quite complicated matter. We, in the IGU, have recently published a document explaining shale gas, fracking and so on. A similar publication is being prepared by OGP. I think that we have to explain, explain and again explain. I am not sure that we will convince but at least we have to try. Of course, exploitation would be different from that in the USA due to diverse regulation, landscape, population density etcetera. First we have to assess it and if it is economically feasible, we have to go on. If not, there will be no more gas and not even the industry in Europe. As I have mentioned earlier, we are already facing the delocalisation of European industries to the USA,

In the end, in 50 years time we might be happy to produce some shale gas in Europe, probably not covering the whole of demand but at least some portion

principally due to shale gas. In the end, in fifty years’ time we might be happy to produce some shale gas in Europe, probably not covering the whole of demand but at least part of it.’
‘A key word in this regard is open-mindedness. In the IGU, we have focused on communication and improving people's knowledge.In the first place that of the policy-makers, and also that of the general public. People usually don’t know what wells are, how they are used and controlled and so on. They think for instance that it is possible to pollute aquifer. Therefore, it is proper to introduce the example of underground gas storage which we have been operating since 1956. I have recently visited a storage facility and it is in perfect shape. Over 57 years we have executed some modifications but there have been no leakages! If it is properly designed and maintained there is no problem at all. Admittedly, shale gas exploitation requires multiplication of wells and that is why we want to be even more careful.’

So, explain, explain and again explain...

‘Absolutely. But you also need the opportunity to explain because people often do not want to listen. Some are prejudiced, especially after watching a famous movie where water was burning allegedly due to shale gas.’

What do you think will be the future of natural gas? Is it a bridge or destination fuel on our way to alow carbon economy?

‘Neither of these options is adequate. We consider natural gas to be a co-pillar for the future because you can build on it together with other sources like renewables. We have to mix all the available energies and use them intelligently. Natural gas is one of the fuels of the future but not the fuel of the future. We don’t want it to be the only source but we want it to contribute to a sustainable development. It is not by accident that the motto of the French Presidency is: “Growing together towards a friendly planet”. A key word is “together” – combining forces with other energy sources for the future.’

Georges Liens is the Chairman of the Coordination Committee of the IGU and at the same time the Senior Vice-President of STORENGY, GDF SUEZ´s 100% subsidiary in charge of natural gas storage worldwide.

Before joining STORENGY (2011), Georges held various high level positions in GDF SUEZ, GAZ DE FRANCE and EDF.

An Engineer (Ecole Centrale de Paris, 76), he is member of the boards of several companies and associations (among others GrDF, the French Gas Association, NGV Global).

Jozef Badida is an energy analyst and correspondent to various energy-oriented magazines. He has advised the GDF SUEZ management active in Slovakia and been responsible for the implementation of the ITO model within Eustream - Slovak gas TSO.

After studying European law at the University in Groningen, he broadened his experience by participating in an internship at the European Commission.