IGU President: Gas supply is catalyst for energy transition

Gas supply “is a catalyst for the energy transition,” and LNG’s flexibility allowed for “tremendous performance” during the pandemic-induced market shocks of 2020, Joe Kang, president of the International Gas Union (IGU) told Daniel Yergin, vice chairman, IHS Markit, as part of the IHS Markit CERAWeek Conversations series. IGU’s members represent over 95% of the global gas market.

During the conversation, Kang said the energy transition is “inherently, characteristically diverse and complex.” Reacting to the International Energy Agency (IEA)’s May 2021 report on pathways to net-zero emissions by 2050, Kang said the IEA scenario—which envisions the global power mix being 90% renewables and 10% nuclear—"is too ambitious and impractical.”

Given that the present global energy mix is 30% oil, 27% coal, 26% natural gas and less than 10% renewable, the energy transition is a time-consuming, expensive, step-by-step process. How can you change the whole landscape in less than 30 years?” he said.

Speaking of the varying challenges that developed, developing and underdeveloped countries face in meeting net-zero goals, Kang said that “different patients with different diseases should have a different prescription. We don’t have a panacea in the energy issue. There is no yellow brick road in energy issues.”   

On global LNG demand during the pandemic years and drivers of future growth, Kang said: “I’m really surprised to see the performance in 2020. Everyone predicted that the LNG market would be down. But we saw the 12th year of continuous growth. 2020 was no exception. We had a tremendous performance in this dire situation.”

“LNG has a great advantage for its flexibility and agility. In 2020 during the pandemic, we actually made progress in terms of consumption especially as oil and coal consumption were down almost 30% from 2019. LNG is different because we did have a huge drop right after the pandemic, but this winter there was a real spike in demand. Thanks to LNG we can manage the huge ups and downs of energy consumption.”

With China on the demand side, “Asia is the primary growth market for LNG,” he said. “But on the supply side, Australia and the US played a key role in meeting demand from Asia. Now it is well balanced. The future outlook of LNG I see as very bright. LNG and piped natural gas are 30% of world gas production. Only 30% is traded: 10% is LNG, 20% is through piped natural gas. I see the increase in LNG outpacing piped natural gas,” he continued.

On the unique role of gas in the decarbonization agenda, Kang said: “Gas has four core attributes: Energy supply that is accessible, secure, constant and affordable. Gas supply is a catalyst for the energy transition. We’ve proved those attributes of natural gas. In the future we are always ‘friends’ with renewables…You can see the trajectory in the global energy mix. Two energy sources are increasing. One is renewables, the other is natural gas. Renewables has a lack of flexibility, intermittency, and seasonality. Gas does not have that. We can complement the shortage of renewables. That’s why we call gas a hand-in-hand partner to renewables.”

On the IEA’s May 2021 report on decarbonization roadmaps to 2050, he noted: “I believe gas will continue to play a partnering role to renewables but the IEA’s roadmap to 2050 didn’t say that. They didn’t recognize how gas contributes to the energy transition. We value the IGU stance, and we are really honored it is an analytical forecast of the energy mix. But we differ with the IEA on the pathway of how to move forward to meet climate goals.”

Continuing, Kang said the IEA values are shared, and meeting net zero-emissions may be possible in some parts of the world—Europe can maintain and manage that target, he said—but “in some developing or underdeveloped Asian countries, they see this as global policy centralization. Underdeveloped or developing countries say this is a second wave of imperialism. That’s not the view of the IGU, it’s the view of developing and underdeveloped countries,” he said, noting that IGU has charter members from Asia.

Regarding the outlook for hydrogen, Kang said: “Renewables have a very bright future, including hydrogen. On the world scene, new technologies, new things are very welcome. We have to analyze the property of hydrogen in a very extensive and accurate way. Hydrogen is, for sure, for the future. But hydrogen is a secondary energy, not like natural gas. Secondary energy is converted from primary energy, or electrolysis from water with a huge injection of electricity. According to the IEA’s roadmap scenario, half of the technology for hydrogen in the energy transition has not yet materialized.”

Hydrogen is a new technology, he said, “but we haven’t looked at what are the manufacturing costs in terms of capex, opex and what infrastructure we need. What are the safety issues that we’re going to face in the future? The IEA said only one side of the plan, they only talked about the goals to reach the climate challenge. But they didn’t list the costs involved. I imagine this is a trillion dollars that we have to pay to enter the hydrogen era,” he said. “Who is going to pay for it?”