Gastech 2019: 5 Reasons the World Is Embracing Natural Gas

By John McKenna

Houston, Texas is the hub for a booming liquefied natural gas trade that’s transforming the US into a major energy exporter. So the Gulf Coast city was a fitting location for the world’s largest natural gas show, Gastech, in September.

Speakers at the conference repeatedly returned to a central theme: how fast gas exports from the US and elsewhere are growing, and how well they’re serving an increasing number of countries.

Natural gas is taking such a central role in global energy needs that one speaker - Nadeem Babar, special assistant to the prime minister of Pakistan – says we’re currently living in “the reign of gas.”

Here are five reasons why he is right:

1. Exports Are Booming

After becoming a net exporter of LNG last year, continued growth could help the US become a net energy exporter by the end of 2019, according to Neil Chatterjee, chairman at the US Federal Energy Regulatory Commission.

Three new LNG production facilities have started operating so far in 2019, with at least one more scheduled before the end of the year, and a further 12 new facilities currently under Chatterjee’s review. That puts the country on track to double its LNG export capacity in 2019, Chatterjee told delegates at the conference. And according to the International Energy Agency, it will overtake Qatar and Australia to be the world’s largest LNG exporter within five years. As exports grow, the number of destination countries is also increasing, with US LNG now travelling to Europe and emerging Asian economies alongside more traditional markets like Japan, China and South Korea.

2. The Market Is Underestimating Global Demand

An increasingly diverse number of countries are importing LNG and many others are looking to start.

“If you look back just 15 years ago, there were about a dozen countries exporting LNG and about a dozen countries importing LNG,” said Alex Volkov, vice president & the head of Global LNG Marketing at ExxonMobil. “Now, there are about 20 exporters and over 40 importers. And a lot of those importers are from the emerging markets, from Pakistan to Colombia to Bangladesh.”

Despite the growth in demand around the world, the rapid increase in US production led some to predict an excess of supply in the next five years.

However, Tellurian president and CEO Meg Gentle, whose company has just secured a $2.5 billion equity investment in its Louisiana-based Driftwood LNG from India’s Petronet, said demand is much more robust than estimates suggest.

“Industry systematically underestimates demand,” she explained. “I'm still astonished to hear us talking about anticipating the market to grow at about a 4% or 5% growth rate, when we know we are now in 2019 on the third consecutive year of double-digit growth rates of both supply and demand. In fact, year to date in 2019, we've increased the market size by 14%.”

3. Innovative Ways of Producing LNG Will Help Cater for an Increasingly Diverse Set of Customers

As the number of markets for LNG grows, the terms on which customers want to buy their natural gas is also expanding. While traditional 20-year contracts from buyers are still investors’ preferred option, producers were told by Olivier Mussat, International Finance Corporation Chief Investment Officer, that these were unlikely to be available in emerging economies looking to build LNG import infrastructure from scratch.

Buyers seeking greater flexibility was a common theme at Gastech 2019, with the market moving towards trading LNG as a commodity rather than via long-term contractual agreements. This means producers need to build their facilities innovatively.

Venture Global LNG co-CEO and founder Mike Sabel said a modular approach gives his company greater control over construction schedules and improves its ability to meet the specific needs of its clients.

“We were able to push production of the systems into a factory environment, which allowed us to contract for specific schedules, specific cost and therefore price,” he said.

Once past construction, the technology operating in LNG liquefaction trains can also boost flexibility, Mitsubishi Heavy Industries Compressor deputy engineering manager Keizo Yoneda told Gastech. He spoke about how combining Mitsubishi Hitachi Power Systems (MHPS)’ H-100 gas turbine with compressor technology creates a single string LNG solution that can produce more than 3 million tonnes per year of LNG. This is done with a much more flexible range of outputs and on a much smaller site footprint than traditional production strings.

4. Gas Isn’t a Just Transition Fuel – It’s a True Complement to Renewables

Natural gas was described as a complement to renewables that offers the capacity necessary to balance huge seasonal variations in energy demand.

“Wind and solar have a significant problem,” said Volkov. “That problem is intermittency. And really, there's not a solution out there that exists today that could solve that problem economically. Batteries are there to solve short-term fluctuations from a few minutes to a few hours.”

Natural gas is far better suited to address major seasonal swings in energy use and “is an excellent complimentary fuel to renewables because it can be brought up and down very quickly,” he added.

Even in countries that already have a high penetration of renewables, there is still plenty of appetite for natural gas. Ecuador’s Minister of Energy & Non-Renewable Natural Resources, Carlos Pérez, told Gastech how his country was approaching 90% renewable energy – and that they wanted to import more natural gas to make that final 10% as clean as possible.

5. Natural Gas Won’t Be the Only Gas Playing a Role – Hydrogen Will Also Be Critical in Helping Lower CO2 Emissions Across the Planet

Hydrogen was highlighted at Gastech as an alternative to natural gas that could play a major role in the difficult-to-decarbonize areas such as heating and heavy industry that cannot be electrified.

Lux Research analyst Runeel Daliah said hydrogen was ideally suited to high temperature heat applications in industry, adding “if you want to decarbonize feedstock, you could replace natural gas with green hydrogen [made from electricity generated by renewables]”.

Hydrogen was also identified as an alternative form of energy storage, with SoCalGas business development director Yuri Freedman saying that along with synthetic methane it was “the only scalable solution to store large amounts of energy for long periods of time.”

John McKenna is an award-winning business journalist with specialist experience in the energy, infrastructure and industrial sectors, John's stories have appeared in leading British newspapers including The Times and The Daily Telegraph.