IEA’s chief: gas golden age still possible

IEA’s Executive Director Fatih Birol said that although the golden age of gas remains more of a dream under current market conditions, it is still possible. 

Speaking at an LNG conference in Tokyo, Birol remarked that cheap coal and increasingly competitive renewables are squeezing out gas in some markets while reforms to inefficient LNG markets have been lagging.

In his keynote speech he points at a mistake within the energy industry that assumed Japan, the largest LNG importer in the world would buy “any amount of LNG at any price.” 

In key regions of the world, including India and ASEAN, gas has been losing market share to coal.

The question for new LNG projects in India, where gas-fired power generation has declined by half, is whether it can compete with domestic coal and solar power, not Russian gas as it was the case previously.

In terms of LNG, Birol said it has a critical role in energy security.

“Japan is the perfect example. When Japan suddenly needed more LNG after the 2011 earthquake, the industry could not produce more LNG for Japan. Thankfully Europe bought less. LNG markets were the critical link that enabled the flexibility of the European system to be mobilised for the supply security of Japan,” Birol said.

He noted that LNG can fulfil this flexibility role only if it is flexible itself, stressing that LNG value chain is exposed to risks and constant geopolitical challenges, as the loss of Yemen LNG and terrorist attack on El Amenas gas field in Algeria showed.

“For LNG to achieve its potential, we need well-functioning markets. But these do not emerge spontaneously. Progress will require modernising the traditional model of government intervention, regulated gas prices, and limited access to networks,” he said.

There is no doubt that a golden age of gas remains possible, very possible said Birol, adding that in fact, for some regions like North America, it is already a reality. But in other parts of the world regulations as well as infrastructure and market development is needed.

“LNG can make a major contribution to improving energy security, facilitating economic growth and providing a cleaner and more efficient energy system. With investment, with a proper policy focus, with enhanced co-operation between producers and consumers, LNG can help gas fulfil its potential. If it does, we may finally delete the question mark from the golden age of gas,” concluded Birol.

LNG World News Staff; Image: IEA