Natural Gas on the CERAWeek Agenda in Houston

Cambridge Energy Research Associates (CERA), the consulting firm founded by Daniel Yergin and James Rosenfield 35 years ago and acquired by IHS Energy in 2004, hosts one of the showcase events for thought leadership in the energy industry once each year, an event fittingly called CERAWeek.

Wednesday, March 7, was what is known as “gas day” at CERAWeek. The takeaway from gas day this year is that natural gas is becoming a more critical element of the energy mix of nations, utilities, and providers over time.

On Wednesday morning of CERAWeek 2018 Yergin introduced U.S. Energy Secretary Rick Perry. Perry spoke of the enthusiasm with which the Trump administration is overseeing the shift of the United States from importer to exporter in these fields.

Perry on his State and Administration

“Just a few weeks ago,” Secretary Perry said, “right here in Houston, DOE met with [industry honchos] to identify the next generation of technologies to utilize more of our nation’s natural resources.”

Perry then luxuriated a bit, as a Texan, in the fact that “the historic natural gas breakthroughs” of hydraulic fracturing and horizontal drilling “began right here, in this state.”

As a member of the present administration in Washington, he did another sort of luxuriating, telling his audience that President Trump wants more than energy security, the President wants the U.S. to share its “energy bounty with the world.”  Perry reminded those listening that “last year [the U.S.] became a net natural gas exporter,” exporting LNG to 27 nations on five continents.

With the mood thus set, Yergin next introduced Ben van Beurden, CEO of Royal Dutch Shell PLC.

LNG within a Product Portfolio

Van Beurden gave a wide-ranging talk about Shell’s ongoing projects and plans, putting emphasis on LNG. He spoke of engineering accomplishments in the pursuit of natural gas supplies, but then swerved a bit, saying that people in the industry like to talk about the cleverness of the engineering, but that perhaps they shouldn’t focus so much thereon:  “Customers really don’t care how clever we are … we have to be known for the care we take with our products.”

In that spirit, he continued, Shell will be adding more biofuels and more renewables into its product portfolio. It will also be making a big push on the natural gas front, because the world isn’t ready to go carbon-free yet and natural gas, which emits less CO2 than the other fossil fuels, is a critical bridge product.

That set things up nicely for the next presentation, a panel on natural gas, chaired by Michael Stoppard, vice chairman of IHS Markit (as CERA’s parent company has been known since its merger with Markit Ltd in 2016.) The other participants were: the Hon. Matthew Canavan, Minister for Resources in Australia, Jack Fusco, CEO of Chiniere Energy, and Rainer Seele, Chairman and CEO of OMV.

China, Germany, Australia

Jack Fusco, formerly the executive chairman of Calpine Corp., became in 2016 the CEO of U.S. based natural gas exporter Chiniere. Thus, as he noted during the discussion, he has seen the relationship between utilities and their resource providers from both sides. Calpine is the largest generator of electricity from natural gas in the U.S.

Fusco had China on his mind, and for good reason. He said, “There’s a secular shift in what China is trying to do” in energy policy. Clean air in the cities there “is more of a social issue” than a matter of economic policy. More broadly, ”We are extremely focused on Asia-Pacific” and have opened new offices of late in both Tokyo and Beijing.  China, and the region more broadly, are very hungry for LNG, which Cheniere is happy to provide.

Rainer Seele said, “Germany has the dream that they will save the climate by moving to 100% renewables.” In particular, the unrealism of this has led to an increase of CO2 emissions in that country, the opposite of what was clearly intended.

Canavan was nodding his head while Seele was saying this, and when Stoppard let him in, he said, “we’ve had similar issues in Australia.” The excessive press for renewables has “led to a reliability issue” and has ended up weakening gas, strengthening coal.  The “dirtiest, most expensive” form of power is called in as a reliable back up for the wind turbines.

Another point discussed: pipeline redundancy as a condition for a healthy nat gas industry. During Hurricane Harvey, Fusco observed, one of Chiniere’s three pipelines was “out of service at any given time,” though they were able to continue their operations with the other two. Nonetheless, things were “too close for comfort,” and the company will be looking to build more redundancy into their system.

Israel and Sri Lanka

Later in the afternoon, CERAWeek brought together ministry level leaders from various nations to discuss energy economics in general, in two panels and for each leader natural gas figured into the discussion, as suited its status as the theme of the day. One of these panels was chaired by Carlos Pascual, senior vice president of IHS Markit, who was joined by the Hon. Arjuna Ranatunga, Minister of Petroleum Resources of Sri Lanka; Hosaka Shin, Deputy Commissioner, Agency for Natural Resources and Energy, Indonesia; and Dr. Yuval Steinitz, Minister of Energy, Israel.

Steinitz spoke of Israel’s support of electric cars, and in the Israeli context, “electricity boils down to natural gas” because that is how the electricity that will charge the cars will surely be generated.

He said optimistically that some of his country’s Arab nations “suddenly see Israel as an asset and not a burden,” at least in part because cooperation against non-state terrorist threats such as ISIS and Al Qaeda has allowed for a normalization of the relations among states. Also, the fact that Israel now has fossil fuel resources of its own, a new development, has helped with the normalization of those relations.

Minister Ranatunga, of Sri Lanka, says that his government has signed MOU with India and Japan, who are going to assist it in building LNG fueled power plants.

“We are getting a lot of new proposals” from those two and other countries, including Australia and Korea.

The consensus coming out of “gas day” at CERAWeek is that the natural gas industry has plenty of room yet to grow, because the commodity itself has a lot of work to do, and that though the industry has difficulties in the way of that growth, none of those barriers looks insurmountable.