"Natural gas is not a transition energy source, and natural gas will be here to stay for a long time as the best partner for renewable energy. ”
On December 4, Li Yalan, President of the International Gas Union (IGU), had a conversation with 11 people at the United Nations Climate Conference. Photo by Tang Xuan.
Han Shulin from Dubai and Xu Peiyu from Beijing
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In the past two United Nations climate conferences, methane emission control has been the focus of the conference.
Methane is the second largest greenhouse gas, and the global warming effect at 20-year levels is 84 times greater than that of carbon dioxide. Methane is the main component of natural gas, and in addition to carbon dioxide from combustion, methane leakage is also an important source of carbon emissions in the natural gas industry.
The prospect of a fossil fuel exit has also been at the heart of the controversy at climate conferences. At the climate conference, the host country, the United Arab Emirates, proposed a climate response package, including the Oil and Gas Decarbonization Charter. Fifty oil companies, which account for 40 percent of global oil production, have signed the charter, including a Chinese company, Zhenhua Petroleum.
On the morning of December 4, Dubai time, the side event on the theme of "China's Methane Emission Control Efforts, Progress and Opportunities" co-hosted by the International Gas Union (IGU) was held at the China Corner of COP28. After the meeting, Li Yalan, chairman of the International Gas Alliance, accepted an exclusive interview with "Finance Eleven".
Li Yalan believes that natural gas, as the lowest-carbon fossil energy, its competitors are not new energy but energy storage, natural gas with system regulation ability is a partner in the development of new energy, and the development speed of energy storage technology with the same regulation ability determines the future of natural gas.
Li Yalan believes that the international natural gas market will continue to be tight for two to three years, with the gradual implementation of upstream investment and expansion, the international market is expected to achieve a new balance around 2025, and China will play an increasingly important role in the international market.
The role of natural gas depends on the speed at which large-scale energy storage technology is developed
"Finance Eleven":The COP28 presidency proposed the Oil and Gas Decarbonization Charter, and the three barrels of oil that China has not joined at the moment, what do you think?For gas companies, what links are generally used to reduce carbon emissions?
Li Yalan:At present, there are various emission reduction organizations, initiatives, alliances, etc. in the oil and gas industry, and many Chinese enterprises, such as the three major oil state-owned enterprises, as well as city gas companies such as Beijing Gas, have also participated in different organizations, and the fact that they have not participated in the "Oil and Gas Decarbonization Charter" does not mean that they do not attach importance to this work. There are more standards now, different organizations have different focuses, its basic data standards are not the same, and the Oil and Gas Decarbonization Charter is just getting started, and you need to analyze the relevance to your own business from different angles, and this work is still ongoing, so not participating at this stage is not the most important thing.
Greenhouse gas emissions from the natural gas industry mainly include two components, one is carbon dioxide emissions and the other is methane emissions.
CO2 emissions come from the combustion of natural gas, and as long as it is a complete combustion process, the CO2 emissions are a certainty. This part of the carbon emissions can be achieved through CCS or CCUS. In addition, in the use of user terminals, it is necessary to improve the energy efficiency of equipment, improve energy efficiency, and reduce energy consumption.
For methane, from the entire industrial chain of natural gas, more methane is emitted from upstream production and relatively less downstream. Upstream enterprises use drones, lidars, etc. to detect methane emissions, and reduce oil and gas field flaring (natural gas associated combustion in the extraction process) through associated gas ** technology;The use of low-power gas turbines and plasma ignition combustion technology to reduce the venting (direct discharge) of natural gas, improve the efficiency of flare flaring, etcFor downstream gas enterprises, it is also necessary to find out the bottom number and figure out how much methane leaks in different links, such as how much pipeline leakage, how much leakage is in the process of gas pipeline construction and maintenance, etcWhen the data is clear, the right medicine can be prescribed.
Moreover, ensuring that the entire gas operation system does not leak is not only a climate change issue, but also a safety issue. City gas enterprises will be equipped with special leak detection vehicles for inspection, and problems can be dealt with at any time. For construction and maintenance operations, methane emissions should be minimized, and methane leakage should be minimized during construction through mechanical plugging equipment.
"Finance Eleven":For the future of natural gas, under the general trend of energy transition, it is generally considered to be a transition energy, how long is this transition period?What is the role in the energy transition?
Li Yalan:First of all, I don't agree with the definition that natural gas is a transition energy source, or at least at this stage. I believe that natural gas is here to stay as the best partner for renewable energy.
In the long run, the role of natural gas depends more on the development of energy storage technology, and if energy storage technology develops fast enough and the cost can reach an acceptable level, the role of natural gas will not be important, but we do not see such a possibility at present.
Natural gas has a strong storage capacity, not only the ability to regulate sometimes, the ability to regulate daily, but also the ability to regulate seasonally, which is a huge scale. At present, the scale of various types of electricity storage is insignificant for the balance of the entire energy system. With the development of renewable energy, the greater the proportion of renewable energy in the power system, the greater the scale of energy storage required. If large-scale energy storage isn't growing fast enough, other energy sources will be needed to help the power system solve seasonal problems, and natural gas will play an important role in this.
As far as China's situation is concerned, the proportion of natural gas in the energy structure is still very low, the proportion of wind power and photovoltaic is not high, and the utilization hours of new energy are also relatively low.
"Finance Eleven":Since 2021, investment in the entire upstream oil and gas sector has recovered, but some oil and gas companies that have been actively investing in new energy have slowed down their investment in new energy. What do you think about this?What are the characteristics of large oil and gas companies in China, Europe, and the United States in their transformation paths?
Li Yalan:Energy companies to meet the demand for energy for economic and social development is one of its important responsibilities, especially now renewable energy can not meet the needs of society, once the first tight, oil and gas companies need to increase investment, increase supply to ensure social demand.
Oil and gas companies are all in the first transformation, but the transformation path is also different. Some European oil companies did have a relatively ambitious renewable energy investment plan, and now it cannot be said that they are not ambitious, in fact, they have been investing in renewable energy, but after all, it is just starting, the base is low, and it will take time to grow. From a strategic point of view, these European oil companies have not flinched much in the development of new energy sources.
U.S. companies are more focused on CCS (Carbon Capture and Storage Technology). Recently, the United States has approved new oil field development projects and the construction of new LNG export projects, and American oil companies still believe that oil and gas will play an important role for a long time, so they pay more attention to CCS.
China's oil and gas companies are doing work in both directions. For example, PetroChina has a good foundation for new energy, its oil and gas fields have a wide area, relatively strong financial strength, and has developed many new energy projects. At the same time, Three Barrels of Oil is also the initiator of the China Oil and Gas Methane Emission Reduction Alliance, and is also doing CCS and methane emission reduction. It should be said that Chinese oil and gas companies have both European companies in the layout of new energy, as well as American companies in CCS.
The international gas shortage** will continue for another two to three years
"Finance Eleven":The Russia-Ukraine conflict has led to very high volatility in LNG (liquefied natural gas)** in Europe. How long do you think the global gas supply and demand tight cycle will last?
Li Yalan:The most direct cause of the gas shortage in 2022 is, of course, the Russia-Ukraine conflict, and the reduction in the use of Russian pipeline natural gas in Europe, resulting in a high increase in LNG**. But in fact, the global natural gas shortage began in the second half of 2021, because the reduction in investment in natural gas exploration and development in previous years has led to a decrease in the amount of natural gas**, and the Russia-Ukraine conflict has exacerbated the imbalance between supply and demand in the natural gas market.
Before the Russia-Ukraine conflict, although the overall global natural gas** decreased, it was a slow process. After the Russia-Ukraine conflict, especially after the Nord Stream pipelines were bombed, the European market suddenly lost tens of billions of cubic meters of natural gas**, and the market reaction was extremely fierce, ** soared. It will take about two or three years to fill this gap, so the global gas tension will continue for another two or three years.
The natural gas industry is a long-term industry, and it will take at least two or three years or even four or five years to increase investment in exploration and development from the shortage of supply in the market to increase investment in exploration and development. Starting in 2021, investment in the global oil and gas industry began to increase. Investment in the oil and gas sector in 2023 has increased significantly compared to the previous year. It is estimated that it will take about two to three years for the natural gas market to rebalance.
In addition, after reducing the use of Russian pipeline gas, Europe has taken some other measures to replace natural gas, such as replacing natural gas with renewable energy, and even replacing natural gas with coal. These measures have played a role, making up for some of the shortfalls in European natural gas.
Under the influence of two factors, the increase in investment in the natural gas industry and the substitution of natural gas in Europe, it is optimistically estimated that if 2025 is a warm winter, the basic equilibrium of the gas market can be achieved in 2025, and it can be rebalanced by 2026 at the latest. The result of the rebalancing is a relative easing and a return to rationality.
"Finance Eleven":How will the global market for natural gas change after the market reaches a new balance between supply and demand?What are the implications for different markets?
Li Yalan:**It is determined by supply and demand, as long as **comes up, **it should return to a more reasonable level. Of course, the ** of commodities is not entirely determined by the market, but also by other factors, such as geopolitics, such as climate policy, etc.
There are two ways of natural gas, one is pipeline natural gas and the other is liquefied natural gas. In the past, natural gas in Asia was relatively high, and Europe was relatively low, because Europe used a large number of Russian pipeline natural gas, and with this basic guarantee, its demand for liquefied natural gas was not large. On the Asian side, China's situation is better, at least there is pipeline natural gas from Central Asia and China and Russia, while Japan and South Korea do not have this condition and can only use liquefied natural gas, so the Asian premium is higher. In the future, China is also likely to build new natural gas import pipelines and import more pipeline natural gas. Of course, it will take some time for the planned new Sino-Russian gas pipeline to be able to supply gas to China.
At present, coal accounts for more than 50% of our energy mix, natural gas is only 8%, the world average is 24%, and the United States and Europe have exceeded 30%.
"Finance Eleven":In terms of the structure of the natural gas market, Europe used to be the equalizer of the international natural gas market, and now institutions including the International Energy Agency believe that China is replacing Europe as the new equalizer, what do you think of this change?
Li Yalan:I agree with that. To be a market balancer, first of all, the market must be large enough, equivalent to having a large reservoir. In the past, China's natural gas market was relatively small, with a relatively small capacity and a limited proportion of the global market. In the past few years, the overall volume of China's natural gas market has become larger, and the proportion of imports in the global market has also increased, and China has become a new balancer.
However, the roles of China and Europe are not completely interchangeable, and Europe still has a certain balancing role, because the demand for LNG in Europe has increased significantly compared to the original.
In addition, the balancer also requires a strong natural gas storage capacity. Europe's natural gas storage capacity accounts for about 25% of its total consumption, and China's natural gas storage capacity has been weak, and now China is vigorously building new gas storage facilities, and when China's gas storage capacity reaches a certain level, it will play a stronger role as a balancer.
"Finance Eleven":Last winter, there was a gas shortage in Hebei again, and the downstream city gas upside down is a very important reason, what do you think needs to be reformed in China's natural gas market mechanism and ** mechanism?
Li Yalan:The last round of natural gas industry reform separated the upstream and midstream, and both formed strong national regulation, with a clear pricing mechanism and return on investment mechanism.
Although in the country's pricing mechanism, there are clear regulations on the return on investment of downstream gas enterprises, but the management of downstream gas enterprises is not a system with the upstream and midstream, and urban gas enterprises are directly managed by the local government, and the market entities are particularly numerous, small and scattered. Large city gas companies, such as Beijing and Shanghai, are directly managed by municipalities directly under the central governmentSmall gas companies may be managed at the county level or by a development zone. When determining the amount of gas, there are many factors to consider, such as the region's affordability, investment attraction, CPI level, social stability, and so on. Therefore, natural gas is an industrial chain, but the management is separated, and the adjustment is determined separately by different levels, which is the main reason.
This round of reform hopes to form 3+1+x (3 refers to the three major oil companies in the upstream, 1 refers to the national pipeline network company in the pipeline network, and x refers to the gas sales company in the downstream), but the actual market pattern is 3+1+3+x, and the gas source distribution is still sold by three barrels of oil to the downstream gas company.
Under such a pattern, there are a total of 4 companies in the upstream 3+1, and there are more than 3,000 large and small gas companies in the downstream.
It is difficult to form a unified reform idea by different departments to manage different links of the same industrial chain. In the case of straightening out the market mechanism, when the upstream price rises, the downstream should synchronize the price, but it is difficult to do it in practice, and many places still need to hold hearings to adjust prices. The situation of individual urban gas enterprises is slightly better, and after the upstream price increase, it can go to industrial and commercial users, but most urban gas enterprises are not so lucky.