LNG offers vital bridge for energy transition, but challenges remain

Developing countries need gas and LNG to make the energy transition the world requires from them, but they face an array of barriers including pricing, policy and infrastructure. These issues were underlined at a panel discussion, Developing LNG markets and infrastructure, focusing on the potential of this natural gas.

India wants to raise the share of natural gas in its energy mix to 15% by 2030, up from 6.2% currently, as part of an effort to cut planet-warming emissions. “By 2030, there will be an increase of three-and-half to four times in the consumption of natural gas in India,” said Akshay Kumar Singh, MD-CEO, Petronet LNG, the Indian government-formed oil and gas company set up to import liquefied natural gas and set up LNG terminals. He said domestic production won’t meet the requirements for gas consumption, which is set to grow not just in India, but also in South East Asia, including China, Thailand, Singapore, the Philippines, Vietnam and Indonesia.

Sukhmal Jain, Director of Marketing for the government-owned Indian multinational Bharat Petroleum, pointed out that Japan, the world’s largest importer of LNG, and the largest exporter in the world, Qatar, are both in the Asia-Pacific region. Suresh Mangalani, Executive Director and CEO, Adani Total Gas, said except for Dahej LNG Terminal - the largest single location LNG storage and regasification terminal in India – other terminals were running at 40 - 50% of their capacity. Dahej (in Gujarat), for example, runs at 90%.

There are development needs upstream, midstream and downstream in the sector, said Manglani, who was upbeat about the potential for MSMEs (micro, small and medium enterprises) to take to gas, provided they have the right incentives. Mangalani said that India uses about 80 million tonnes of diesel for long-haul trucks and buses, an amount set to grow to 130-140 m tonnes by 2030. If a quarter could be shifted to LNG, it would make a huge difference to India’s carbon emissions, he said.

Jain said the transition to greener fuels needed a “lot of funding”, while Singh considers regasification capacity under construction impressive. However for LNG to get wider acceptance, the system needs to “synchronise” all requirements. Participants noted the price of LNG that has suddenly shot up, due largely to the pandemic and war in the Ukraine. Prices must be competitive with liquid fuel, it was suggested. One way to avoid such global spikes was to work on some demand-based contracts in the future. Jain called for “cost efficiency, efficiency in operation, and tax efficiency” for LNG. Singh agreed, saying taxes should be such that the prices are affordable.

Andrew Barry, Chairman, ExxonMobil LNG, Market Development and VP Global LNG Marketing, ExxonMobil Oil & Gas Company, said India’s target of 15% of gas in its energy mix was bold, and a challenge. He said countries faced an energy “trilemma”: ensuring energy security for themselves, energy at the lowest cost, and producing energy with the lowest emissions.

Octávio Simões, CEO of the Houston-headquartered natural gas company Tellurian, said the reality of today’s world was that 18% of the population consumed 60% of its energy, while the remaining 82% consumed 40%. There are three billion people living in “energy poverty” and 4 billion on the planet living on less than US$7 a day. “Without sorting out the issue of people living in energy poverty, we cannot get a lower carbon-emitting world,” he said.

Simões also pointed out how the US government had “confounded everybody” by inserting a clause which restricted LNG exports. “We are one of the largest producers of oil and gas, and yet we are stuck in a 1974 mindset which sees the country as a victim of the outside world controlling fuel supplies, when it’s actually the opposite,” he added.

It is thought that Africa might not continue to export its fuel resources, including gas, in favour of domestic use. As of 2021, Africa had 620 trillion cubic feet of natural gas reserves. Nigeria leads the continent with around 200 trillion cubic feet, or 3% of proven global natural gas resources. Algeria, Mozambique, Egypt, Libya and Tanzania follow.