Continental Focus, International Reach

The Energy Sector in Transition

Thursday, November 14, 2019

At the end of the month, Malabo in Equatorial Guinea will host the 5th GECF Summit.
Ministers and heads of state from all Gas Exporting Countries Forum nations will gather to discuss the future of natural gas in the energy mix. The 2nd International Gas Seminar also forms part of the 5th GECF Summit of Heads of State and Governments.

Organized every two years, the gathering brings together leaders from some of the main gas producers of the world, including Algeria, Bolivia, Egypt, Equatorial Guinea, Iran, Libya, Nigeria, Qatar, Russia, Trinidad and Tobago, the United Arab Emirates and Venezuela. It provides a platform for members to discuss trends in the gas market, potential policies for the energy sector and opportunities to collaborate.
This is the first time the summit is being held on the African continent, taking place between November 26 and 29, 2019

We spoke to Mounir Bouaziz, Energy Consultant and Former Vice President, South America and Africa at Shell. We wanted to know what the future holds for the gas sector internationally, and specifically on the continent.

What are the major problems / challenges facing the natural gas industry?

The Energy Transition is upon us. The global energy sector is in the early stages of its most dramatic transformation in over a century. More energy needs to be delivered to the world but it must be cleaner. Natural gas, given its lower emissions than coal and other liquid hydrocarbon fuels, can play a big role in bridging to zero carbon energy mix, but I think that role is still not understood. Therefore, the challenge the industry is facing is to “force” itself into new markets and sectors and truly partner with renewable energies.

What role do you see gas playing in the development of the African energy sector?

I believe that gas is a development tool. I have worked in the domestic market in Egypt in the early 2000’s and developed two Local Distribution Companies and one Natural Compressed Natural Gas for vehicles. I saw how the availability of gas contributed to jobs creation and economic development in addition to obvious environmental improvements.

In general, Africa is more known for its gas/LNG export potential and projects than for successful domestic gas utilization. I believe the quick adoption of the small-scale-LNG solutions can leapfrog gas penetration in local African economies. LNG can be transported for 100’s of kilometers on the back of trucks or in ISO containers. At the required destination, LNG is transferred into small storage tanks and regasified using simple off-the-shelf ambient heat exchangers. Small distribution networks could be established to deliver the regasified gas to consumers.

Not only would this deliver a clean and affordable energy to consumers, it would also stimulate the local economy by creating new jobs and new local content activities in developing and operating this new sector.

For this to work, LNG sourcing hubs would need to be created. Equatorial Guinea is setting the scene and taking the lead in announcing their LNG2Africa initiative but also building the first small scale LNG terminal in Africa which can be fitted with truck loading facilities for further onwards LNG delivery mainland.

Is it fair for climate activists and environmentalists to target the oil and gas industry?

Yes and no. I think a healthy check and balance is always beneficial. I witnessed myself situations where this challenge delivered environmentally positive and better outcomes. I can understand targeting low environmental operational standards but targeting the oil and gas industry for what it delivers is not productive. The world is not ready to function without oil and gas. There will be a transition which can take decades to gradually decarbonize our energy mix. I think what should be targeted by activists is the Consumption. There is still a lot to be done on energy efficiency. New coal plants should be banned and existing ones gradually decommissioned. Light vehicles should all eventually be electrified and supplied with a clean source of electricity. Diesel for the heavy transportation sector and Fuel Oil for marine should be displaced by LNG. The consumer should be able to demand zero carbon energy products and somehow influence the nature of the production and perhaps nature-based offset solutions.

I believe the oil and gas industry is fully aware of these challenges and dilemmas. Large IOC’s can be part of the solution. They have the resources and are driven by their shareholders and employees to deliver solutions. For instance, Shell, which I know well, is committed to the Paris Agreement and has the ambition to bring down the net carbon footprint of its energy products by around half by 2050, and 20% by 2035.

Is the gas industry taking adequate action in response to environmental and global warming concerns?

Unfortunately, there are still large volumes of associated gas being flared around the world. Tackling gas flaring is challenging but has a big impact on CO2 reduction at lower costs than achieving the same CO2 reduction elsewhere. A decade ago, I led the large gas flaring reduction project in Iraq, which is now Basra Gas Company. It was extremely challenging and complex, and I understand why the industry shies away from this type of undertaking, but given the climate change risks we are facing, every bit helps, and I believe this could be an issue the GECF should address.

How important is it for gas producers to diversify operations?

Very. I believe that gas producers should take an active role in creating new markets and getting closer to the end consumers. There are abundant resources of natural gas around the world, but there is still a lot to do around the “delivery“ to unmet demands and in diversifying gas utilization.

LNG has played a big role in linking large markets to even larger production regions. It is pleasing to see the increasing number of countries entering the LNG sector as either producers or consumers. However, the industry needs to develop new, perhaps smaller markets and create utilization in the heavy transportation sector, shipping and mining.

“Small-Scale LNG” is an exciting trend. LNG can be moved in smaller quantities, by smaller carriers and can be regasified through off-the-shelf low-cost equipment. This opens a wider geographical market, essentially displacing diesel in power generation and transportation. In isolation, most of these individual markets are not that material for the big LNG players, but in aggregation, this could be a large demand.

I can see in many regions around the world shortages of back-fill gas for existing and fully functioning LNG production facilities, while neighboring countries either have undeveloped gas resources or are not reaching agreements on joint development of shared gas fields. However, there are also good examples on how these types of issues have been resolved. So in a way, diversification is also about cooperation.

How important are virtual pipelines to the future of the natural gas sector?

LNG is in effect a “virtual pipeline” traditionally linking gas resources to remote markets, which cannot be reached by traditional gas pipelines. At a later stage, LNG delivery solutions were preferred to pipelines to avoid cross border issues or “linear infrastructure projects” challenges but also to tailor-make supply to demand, while diversifying supply sources.

Today, with the commoditization of small-scale LNG equipment, it has become quicker and more affordable to quickly build LNG receiving and regasification facilities while transporting the LNG either by small LNG carriers, trucks or ISO containers. So, not a long time ago, the only solution for any particular country was to invest in a FSRU, requiring 100’s of millions of US$s investment and deep-water marine conditions. The volumes had to be high and commensurate with the investment. This has left many countries or demand areas relying on Diesel for power generation, typically for 100 to 200 MW. A small-scale LNG terminal consists of several cryogenic “bullet” tanks of some 500 to 1500 cubic meters and an ambient skid-mounted heat exchanger costing 10’s of millions of US$s. A big contrast from the FSRU concept. Typically, a 200 MW diesel-fired power plant, can save some $50 million per year when converting to LNG. Importantly, 100% reduction in SOx and 40% reduction in NOx and CO2 can be achieved.

I find the prospect of small-scale LNG fascinating and have been working on this theme for the last few months. I can see many countries “ready to adopt” this solution. The aggregated demand is quite material. The key bottleneck is in the shipping capacity. There are still relatively few small LNG carriers operating in world.

What is your view of the rise of unconventional gas and its integration into the global gas market?

I remember well in the early 2000’s when the whole LNG industry was targeting the US as a major LNG market and was caught by surprise by how quickly the US moved from a potential large gas import market to an “island of self-sufficiency” all thanks to the rise of unconventional gas.

Unconventional gas has not seen the expected rise perhaps forecast 10 years ago, but I have been following very closely the development of unconventional gas in Argentina, particularly in the Vaca Muerta Basin. It has emerged as a world-class basin and attracted several large players. Should the political and regulatory environment remain positive, Argentina could soon become an LNG exporter.


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