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    Europe's Climate Goals Depend on Gas: Statoil

Summary

In the first of a two-part interview with NGE in Brussels, Bjørnson addressed the the changing role of gas in technology and transport, falling gas prices and Norway’s role in European gas supplies as well as environmental issues.

by: John Roberts

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Europe's Climate Goals Depend on Gas: Statoil

For Europe to tackle the key issue of climate change, the best way is to copy the US and replace coal with gas. That’s the thinking of Rune Bjørnson, the Vice President European Policy and Regulatory Affairs, for Norway’s Statoil.

In the first of a two-part interview with NGE in Brussels, Bjørnson addressed the the changing role of gas in technology and transport, falling gas prices and Norway’s role in European gas supplies as well as environmental issues.

One of the most important and quick fixes for the European climate” issue, said Bjørnson, “is to substitute coal with gas. That’s very very important. It is the way to a cost-efficient quick fix to reach the climate targets.”

For many countries, the Statoil executive argued, “gas is most important option they have to reduce emissions.” Then, drawing specific attention to the different approaches taken by the US and EU member states, he added: “One interesting comparison is the difference between US and Europe. The US has increased their use of natural gas. The result, whether intentional or not, is a considerable reduction in greenhouse emissions.

“We will also see an increasing recognition of this in Europe over time,” Bjørnson added. “Gas is an immediate solution, which is currently the only cost efficient solution to the climate crisis.”

But if gas is to increase its share of the market, then is it sufficient simply to seek to replace coal in power generation? Statoil does expect European demand for gas to power to recover between now and 2020 – and indeed, beyond 2020 as well -- primarily as a result of tighter European climate policies. In this context, the Statoil VP considers that gas can play an increasing role in established markets, such as heating, not least through the introduction of new technologies, such as improved condensed boilers and combined-cycle power plants.

There are still some areas in Europe where gas does not have a reasonable market share, he notes, adding: “It could have -- and should have.”

New markets for gas

But, he notes, gas also gas the potential to play a major role in transforming transportation.  This includes converting tankers from running on fuel oil to reliance on liquefied natural gas (LNG). LNG is very interesting in this regard he notes, adding: “It’s often as good as fuel oil with scrubbers.”

On land, there are options for utilising both LNG and compressed natural gas (CNG) for road transportation, primarily lorries. However, he cautions: “To what extent this actually develops and materialises, it’s still early days. But what we do know is that gas from a commercial point of view is very attractive. What’s missing is more infrastructure around it.

In the long run, with automobiles so heavily dependent on oil – in the form of gasoline or diesel – the question to be addressed is that of “the car fleet as such converting to gas – whether that be CNG or LNG.”

The Statoil executive seemed less exercised about the consequences of relatively low gas prices than one might have expected from a senior official in a company which markets around 70% of Norway’s output.

“It matters less today than it used to,” Bjørnson says. “Previously prices were linked to oil; not so much now,” and, as a consequence, “gas does not compete against oil in many parts of the world to the extent it did.”

There is, of course, one major exception to this, as Bjørnson himself is quick to point out:  LNG going to Asia. “there is still a link in contractual formulae, so Asian LNG/Global LNG prices come down significantly,” as oil prices fall, he notes.

Overall, Statoil is clearly bullish about global gas prospects, whilst cautioning that it makes sense to look at gas as much in a regional context as on a worldwide basis. Bjørnson said: “Gas’ role will increase because there are still abundant reserves; it’s affordable and it is the cleanest fossil fuel by far.” 

In regional terms, he continues, “I think we will see continued growth in Asia.” However, he adds, because of the economic situation, “the growth rate will be lower than anticipated.”

“But even so, gas will grow,” he stresses. The same will happen in the Middle East, he notes, adding, “we’ve already seen enormous growth in parts of America.” In other words, gas remains a market ripe for fresh growth.

To follow on Monday 15 February: Norway and its competitors in the European market

John Roberts