Reports from the Regional Coordinators

Li Yalan

x From left to right:

H.E. Mohammad Hamid Ansari, Vice President of India, H.E. Gurbanguly Berdimuhamedow, President of Turkmenistan, H.E. Mohammad Ashraf Ghani, President of Afghanistan, and H.E. Nawaz Sharif, Prime Minister of Pakistan, pressing the button to begin the welding process of the TAPI pipeline, in Mary, Turkmenistan on December 13, 2015.

In this issue we return to IGU’s Regional Coordinators for Asia and Asia-Pacific and for Europe, following on from the last issue’s reports from the Regional Coordinators for Africa and the Middle East, Latin America and the Caribbean, and North America.

Update on natural gas developments in the Asia and Asia Pacific Region

By Li Yalan In the endeavour to tackle climate change, countries in the Asia and Asia Pacific region have submitted Intended Nationally Determined Contributions (INDCs) and supported the adoption of the Paris Agreement on climate change. Developing countries such as China, India and Indonesia are facing greater challenges than developed countries including Japan, Korea and Australia. Natural gas plays a major role in their effort to fulfil their commitment to emissions reduction.

China has made a commitment to the international society that its carbon dioxide emissions will peak by around 2030 and that it will work hard to achieve the target at an earlier date. To this end, the share of natural gas in primary energy consumption will be increased to 10% in the next five years. “Expanding natural gas consumption and accelerating pipeline construction” is identified as a key task in the 13th Five Year Plan for the energy sector.

The decreasing natural gas price and the return of Iran have brought more opportunities to the South Asia region, where natural gas resources are relatively insufficient. As the world’s fourth largest emitter of CO 2 and third largest consumer of coal, India is striving to develop renewable energy while actively expanding and enhancing its natural gas supply. Negotiations are being held between India and Iran to build an undersea gas pipeline; the two countries are also discussing the joint development of the Farzad B field in the Persian Gulf. At the end of December 2015 the Turkmenistan-Afghanistan-PakistanIndia (TAPI) pipeline project was formally inaugurated. The proposed approximately 1,800-kilometre pipeline is expected to be operational by 2019, enhancing supply security for all countries involved. Pakistan and Qatar have finalized a 15-year LNG supply deal. Following the contract, Qatar will supply 1.5 million tonnes of LNG to Pakistan per year.

South-East Asian countries seek development while cutting emissions by increasing natural gas in power generation. Currently

over 90% of power in Singapore and 80% in Myanmar is generated by natural gas. In the next four years, Indonesia will add 70% installed capacity for power generation, where natural gas will play a major role as the government remains cautious on the decision to start nuclear power. The Philippine government is developing a new energy plan to increase the ratio of gas-fired power generation, ultimately leading to an energy mix where natural gas, coal and renewables each form one-third of the energy consumption matrix.

Li Yalan is Chairperson of the Board of Directors of Beijing Gas Group and the IGU Regional Coordinator for Asia and Asia Pacific.

More policies to impact supply and demand

By Gertjan Lankhorst This year, the European Energy Union will issue new legislation. Amid the tendency in Europe towards political market interference and an increasing focus on national interests, completing the internal market should remain the leading priority of policymakers in Brussels. The internal market is the prerequisite for security of supply, which in turn is intertwined with security of demand. The latter is greatly strengthened if policymakers acknowledge the contribution of gas to emissions reduction.

Last year, the energy news in Europe was dominated by views on the future. Starting with the creation of the Energy Union, and ending with a global climate agreement in Paris

Gertjan Lankhorst.

Leading owner and operator of floating LNG import infrastructure

x  The creation of one

large integrated market with transparent prices and liquid hubs will increase the attractiveness of Europe globally.

at COP 21. 2016 will be the year in which the policy fallout of both will be addressed.

At the time of publication of this article, the European Commission is expected to have presented a package of policies which aim to reduce Europe’s gas imports. From my experience, I seriously question whether import dependency in itself should be a matter of concern. The way we deal with it is the real issue. The view of the European gas industry is quite simple: rather than political meddling, more competition and cooperation within Europe is needed.

LNG is an interesting example. Despite large amounts of unused capacity in existing terminals, new terminals are planned, because politicians think this serves national interests. However, construction of new terminals merely on political grounds would negatively influence, among other matters, market flexibility. In order for gas to flow freely through Europe, markets should be well connected. This, I believe, is a prerequisite and hence should be the main policy objective. Furthermore, policy efforts should focus on maintaining and increasing the global attractiveness of the European gas market. Stronger political involvement in

commercial contracts or creating strategic gas storages is in this respect counterproductive. The success of the NBP and TTF trade hubs clearly shows that the creation of one large integrated market with transparent prices and liquid hubs proves my point.

While the ink of the signatures to the Paris Agreement is still wet, Brussels is currently developing new directives for renewable energy and energy efficiency, as a first step in converting the climate agreement into regional legislation. Of course, mankind needs to be prudent with the resources the earth is endowed with. However, selecting winning technologies to reduce our dependence on these resources would hamper innovation. Moreover, there are many pathways to the ultimate objective: reducing CO 2 emissions. Natural gas, in that respect, is not to be disregarded as an obsolete fossil fuel. It is a modern energy source, supporting emissions reduction through solutions ranging from innovative power-togas technologies to highly efficient heating appliances that balance prosumer’s energy demand profiles. The potential to increase resource efficiency is still huge. In that respect I was very surprised to hear that the European Commission aims for a massive turn to district heating as the ‘fuel’ of choice. This doesn’t make much sense since an almost Europeanwide dense network for gas is available. So, building on the benefits of the existing natural gas market to reduce emissions will result in higher levels of trust by Europe’s natural gas suppliers, which is key to attracting the required supplies.

Acknowledging the value of natural gas for Europe’s climate ambitions contributes to the security of supply pillar of the Energy Union, by creating certainty in the European market for suppliers around the world.

Gertjan Lankhorst is CEO of GasTerra, Member of the IGU Executive Committee and IGU Regional Coordinator for Europe.