More than 90 percent of global gas’ consumption growth to 2040 will come from cities. This will require significant infrastructure investment in developing countries, estimated between US$35-55 billion per annum and will need collaboration and conversation across the entire gas value chain to ensure the competitiveness, availability and sustainability of gas according to a new report jointly published by Snam, International Gas Union (IGU) and The Boston Consulting Group (BSG).
As the world experiences a series of rapidly evolving energy transitions across different geographies, economic sectors, and energy sources, the “Global Gas Report 2018” assesses the unique role that natural gas can play in the global energy mix to drive economic development while limiting environmental impacts.
Jointly published by Italy-headed Societal Nazionale Metanodotti (Snam), the International Gas Union (IGU) and The Boston Consulting Group (BCG), the report was launched in the United States at the World Gas Conference in Washington D.C. In this second edition, the report highlights the key trends in the global natural gas market and examines how these speak to the sector’s future growth prospects.
The 2018 Global Gas Report showcases the valuable role of natural gas as an energy source in the global energy mix and for ensuring energy security around the world. The report also points out the need for concerted actions from a variety of stakeholders. These include the development of new business models and technologies from gas industry participants, effective policies from governments, and sustained capital commitments from financial institutions, commented Ivan Marten, Vice Chairman of BCG’s Energy Practice.
Gas consumption set to grow
According to the report, gas consumption is widely projected to grow in the long run under virtually all major scenarios, including the most aggressive low-carbon transition scenarios. Prominent forecasts also project gas to overtake coal as the second leading source of global energy consumption by 2035, behind oil. The majority of forecasters expect gas to grow from the current 22 percent to over 24 percent of the global energy mix by 2035.
The report considers how 2017 was an impressive year for gas demand growth, supported by increased LNG market liquidity and the growing role that gas is playing to meet more sustainable energy supply. Preliminary data suggest that in 2017, global gas consumption experienced its strongest growth in over a decade at 3.7 percent year-on-year.
This is more than double the average growth rate of the prior five years and increasing market liquidity and availability thanks to the growing liquefied natural gas (LNG) market up 48 billion m3 (Bcm) or 12 percent in 2017 compared to the average 1.6 percent in 2010-2016.
Starting from the context of a strong increase in 2017 gas demand the report highlights that, in order to continue strong growth, the industry must focus on three core levers:
- Cost Competitiveness– Improving the relative cost of gas to other energy sources through a combination of LNG cost efficiencies, pricing environmental externalities, and promotion of local gas production in markets around the world. This is especially important considering that over three-quarters of forecast demand growth by 2040 comes from non-OECD regions.
- Security of Supply– Enabling gas supply security through the development of enhanced networks and infrastructure, more flexible commercial models, and new modular access-enabling technologies. Rapidly developing gas infrastructure in Asia and Africa will be critical given the lack of access to gas in those regions today.
- Sustainability– Promoting the environmental sustainability of gas through measures to reduce urban air pollution, develop low carbon technologies for gas, integrate renewable gas sources into existing infrastructure, and limit methane emissions. Reducing emissions through the gas supply chain will be critical in OECD markets in particular as more aggressive climate targets are implemented.
Urban demand driving growth
This year’s report includes a special feature on the role and opportunities for gas in cities, given it provides specific advantages for air pollution, greenhouse gas (GHG) emissions, heat intensity and scalability. More than 90 percent of projected global gas consumption growth to 2040 is likely to come from cities. According to the report, this will require significant infrastructure investment in developing countries, estimated between US$35-55 billion annually.
This report showcases the excellent prospects for natural gas over the next few decades, particularly within urban environments. Natural gas combines high heating intensity and efficiency with low emissions and virtually no pollution, all while delivering energy for almost any use. These qualities make it unique as an abundant, flexible and cost-effective fuel, which can also address the environmental challenges in urban environments. Combined with growing urbanisation trends, this presents a significant opportunity for continued gas demand growth, noted David Carroll, President of the IGU.
To continue this growth trajectory, there is a need for collaboration and conversation across the entire gas value chain, policymakers, and other key stakeholders, to properly recognize and address the opportunities – and challenges – facing the industry.
The report calls on industry and policymakers to cooperate on ensuring the competitiveness, availability, and sustainability of gas, and to focus on the special role that gas can play in cities.
Gas offers significant opportunities for more sustainable development. It will provide clean, reliable and affordable energy to millions of people in the developing world. Moreover, 90 percent of global gas growth is set to come from urban areas. That means that, as penetration grows in power generation, heating and transport, gas will help cities to become cleaner. The flexibility of gas and the ease with which it can be transported and stored make it an ideal partner for the growth of renewables. And gas is well on the way to becoming a renewable energy source itself, thanks to the development of green gas technologies. The challenge of securing growing amounts of energy that’s cleaner and cheaper will only be met by working together across industries and geographies, said Marco Alverà, CEO of Snam.
Biomethane could have a material impact
On biomethane (green gas or renewable natural gas – RNG), the report suggests that it is still at “an early stage of development”, although biogas plants have seen strong growth in Europe, driven by favourable policy environments in countries like Italy, Sweden, and Germany.
Early estimates for its potential availability, using assumptions coherent with the protection of the food supply chain range, suggest the technology “could have a material impact on supply dynamics.” For example, in Italy, the potential production of biomethane is up to 8 billion m3 per annum by 2030.
The report points out that the cost structure of biomethane is currently not competitive with fossil-derived natural gas, but may be competitive with solar and wind renewables when considering the cost of intermittency/storage.
In addition, the report notes power-to-gas (P2G) technologies could be integrated into the process to upgrade biogas into biomethane, which results in surplus carbon dioxide (CO2) from the biogas production along with the hydrogen produced through electrolysis using excess electricity.
Potential avenues for cost reduction of biomethane production include the introduction of sustainable cover crops feedstock, the increasing production from industrial organic by-products and wastewater treatment plants (WWTP), the standardization of anaerobic digestion (AD) plants and the development of new technologies for small size biogas to biomethane upgrading plants.
