January 2022 – @alvaroriosroca – In an August issue this year, we commented on a report launched in May 2021 by the International Energy Agency (IEA) entitled “Net Zero by 2050 – A Roadmap for the Global Energy Sector”. This report shocked much of the global energy community with its drastic, irresponsible and unenforceable nature.
The IEA report, in its concluding paragraph, indicated that “as of 2021 no new investments in hydrocarbon exploration and exploitation should be approved or necessary at a global level to reach the goal of Net Zero Carbon by 2050”.
Well, months later came the eagerly awaited climate summit in Glasgow where the radicals (Greta in the middle) demanded the same as the IEA, i.e. that the world stop producing fossil fuels very quickly and transition overnight to renewable and intermittent energies.
In Glasgow, interesting things happened. Several countries, for example, did not send their highest authorities, such is the case of China and Russia. China understands that it cannot change with the snap of a finger an economy based on coal, gas and oil to new and intermittent energies. Russia also understands that it is sustained mainly by its huge exports of oil and natural gas, and that it cannot commit to stop producing them.
Well, Glasgow was in a way another summit to land on pragmatism and to understand that the countries and inhabitants of the planet do not want to run out of energy and also do not want energy at high prices, especially the least developed countries which are the ones that pollute the least. The protesters still do not understand three fundamental aspects of global energy demand.
First, the planet is becoming more and more populated and needs more energy for this vegetative growth. Second, all countries (including the so-called socialist ones), without exception, want their GDP growth to be as high as possible in order to provide welfare for their citizens, and for this we need more and more competitive energy. Third, a Chinese citizen who still lives with rice and a bicycle wants to live like a Texan with a 6,000 CC pick up truck and eating 600 grams steaks. In other words, we need more energy and affordable for them too.
Finally, in Glasgow it was discussed to include natural gas as the most important energy in the energy transition, but the pressures were there for it not to be so, but it will be so, as we will see below.
Data from 2019, reveal that the USA generated 23% of electricity with coal, the European Union did it with 16% and China 65%. Latin America has a hydro and thermal base with natural gas being one of the least emitting regions on the planet with 5% of its electricity generation with coal. The first big step these countries have to take is to switch from coal to abundant, competitive and clean natural gas. There is no other way and that will greatly reduce emissions.
What happened in the last months of 2021, due to the recovery of demand and also the cuts that have been taking place as a result of the pressure to produce neither oil nor natural gas, has resulted in very high prices for natural gas all over the planet. Renewables are not going to replace coal, nor are they going to provide back-up for the demand of a harsh winter. There is no alternative.
But if we do not explore and look for much more natural gas as proposed by the EIA and many environmental fanatics, we will either have serious global rationing and pay a lot in inflation and ultimately we will not be able to reduce the use of the much more polluting coal and thus lower emissions rapidly. The transportation sector can and should run largely on natural gas, especially in the maritime, heavy transport and other sectors where electric batteries are an acceptable solution. And electric vehicles will be able to acquire their energy from renewables backed by abundant, cleaner and more competitive natural gas. Remember that we have pipelines and LNG transportation that provide the infrastructure and logistics to move natural gas between supply and demand.
Therefore, the sovereign of the planet is and will be natural gas for many decades, whether we like it or not.
*Former Minister of Hydrocarbons of Bolivia and current Managing Partner of Gas Energy Latin America.