Natural gas: the fuel of the future Gas and coal: friends or enemies?

Transcription

1 Natural gas: the fuel of the future Gas and coal: friends or enemies? 24 April 2013, European Parliament

2 AGENDA 1 Analysis of the UE energy mix 2 Role of natural gas in the UE energy mix Benefits of natural gas Shale gas revolution in the USA Shale gas potential in Europe 3 Conclusions 2

3 EU policy aims at making energy production eco-friendly and competitive at the same time. The energy mix is largely divergent across member countries. For each state it is a result of both historical reasons and resource availability. EU energy policy requires countries to shift towards low-emission energy sources. Energy producers in member states need to invest in new sources of energy generation to meet EU guidelines Several alternatives are available: Energy mix in selected EU countries (%) Source: Natural Gas Information 2011 Renewables Gas Carbon capture and storage Nuclear 3

4 Forecasts point at growing share of gas in the EU energy mix EU energy mix ( ) and changes forecasts ( ) % Coal -2.1% -0.5% 0.0% 0.0% +0.3% +0.6% +4.7% Source: EXXON Natural gas growth clearly outperforms that of nuclear and fossil fuels (CAGR +0.6%). Dynamic growth of renewables is due to the low base effect. After considering EU policy requirements and economic feasibility, countries consider gas to be a viable and an attractive option for energy generation 4

5 Gas- based power generation is an attractive alternative both short- and long-term 1. Gas is eco - friendly 3. Gas is good for the economy Low carbon footprint 2. Low water requirements Gas is a perfect complement Natural gas is explored in for renewables line with the highest quality standards Gas is a reliable energy source Gas can be used to hedge renewable energy volatility Gas can be used for peak shaving of energy demand Gas can be stored Gas fired plants are relatively cheap and quick in construction Using gas improves energy security Gas is a more cost-effective alternative compared to renewables Case study: US shale gas revolution 5

6 Gas- based power generation is an attractive alternative both short- and long-term Gas is eco - friendly Gas has the lowest carbon footprint of all fossil fuels - 56 kg/gj which is 23% lower than oil and 49% lower than coal Carbon emissions by fossil fuel type (kg/gj) Production of 1 BTU from shale gas has low water requirements ca % of required water can be either purified or reused Natural gas is explored in line with the highest quality standards: Constant technological developments reduce the environmental impact of gas exploration Gas companies engage in environmental responsibility actions on a constant basis Source: Centre for Emission Balancing and Management (KOBiZE) Quantity of required water to generate 1 BTU by fuel type (litres/btu) over 9500 Minimum required quantity of water Maximum required quantity of water Source: PGNiG analysis 6

7 Gas- based power generation is an attractive alternative both short- and long-term Gas is a perfect complement for renewables Gas can be stored This is not the case with renewable energy inputs (e.g. sun rays; wind) Consequently, gas can be accessed whenever needed Gas can be used to hedge renewable energy volatility Gas based energy production volumes can be adjusted within minutes This is not the case with volatile renewable energy sources such as wind and solar MW Peak Usage rescheduled to fit under lower threshold Peak Demand Shaved Peak Demand time 7

8 Gas- based power generation is an attractive alternative both short- and long-term Gas is good for the economy Construction of gas fired plants requires relatively short time Gas plants construction takes 2-3 years, which is 2-3 times less compared to coal and nuclear plants Gas is a more cost-effective alternative compared to renewables This is especially important for countries which have historically relied on emission rich energy sources such as coal Using gas improves energy security Construction of numerous LNG terminals and interconnectors opens Europe to the global gas market Diversification of potential suppliers has a positive effect on energy security Construction cost (USD / kwe) Construction time (years) Gas Coal Nuclear Wind Micro hydro n/a n/a Solar n/a n/a Source: International Energy Agency 8

9 USA example: shale gas revolution Gas is good for the economy EUR/MWh Comparison of gas prices in US and Europe ( , EUR/MWh) At end of 2012 the US gas price was over 3 times lower than the gas price in Germany (which, in turn, was lower than for most of Central Eastern Europe ) Benefits to the US economy: The benefit included 17,000 new chemical industry jobs and an added 395,000 jobs in other industries ( ) $4.4 billion in additional federal, state and local tax revenues ( ) $32.8 billion in increased U.S. chemical production, $16.2 billion in new capital investment in the chemicals industry, and $132.4 billion in additional U.S. economic output. Pipeline & Gas Journal In the United States about 85% of the chemicals produced are derived from gas, while internationally the industry depends on oil or naphtha ( ) the United States now has about a 50-to-1 margin gas to oil ( ) the new economics of shale gas are a game-changer Cal Dooley, CEO at American Chemistry Council It is an unbelievable infrastructure advantage that we have going that now has a resource advantage (...) Shale gas is an unbelievable opportunity. It makes me wish I were 50 years old again because the next 10 years are going to be pretty exciting Jim Teague, COO at Enterprise Products 9

10 Like USA, Europe can leverage on its shale gas Initial shale gas potential estimates* (tcm) Multiple of 2012 gas consumption (#) Domestic EU Poland 1) France Norway Ukraine Sweden Denmark UK Germany TOTAL: 37.2 Basins with current shale gas exploration (2010) Basins considered for shale gas exploration (2010) 10 Map: Polish Geological Institute, National Research Institute *ARI, EIA, PGNiG 1) Polish Geological Institute estimates are lower and suggest deposits of 0,3 0,7 tcm

11 Can Poland start the shale gas revolution in the EU? Poland may have significant shale gas reserves Initial studies estimate Polish shale deposits at 5,3 tcm 1) This is enough to cover current domestic and EU gas demand for respectively 345 and nearly 12 years Poland is EU leader in shale gas exploration Up to now, 44 wells have been drilled, of those 13 have been fracked PGNiG plans 13 drillings in 2013 Poland is developing interconnections with neighbouring member states There are potential gas interconnection projects linking Poland with EU members: Lithuania, Slovakia, Czech Republic, Germany. Planned / proposed gas interconnections Poland has the potential to bring shale benefits to Europe 11 1) Polish Geological Institute estimates are lower and suggest deposits of 0,3 0,7 tcm

12 Key benefits of shale gas Energy security Shale gas deposits may enable EU to be less dependent on import. This is an opportunity the EU cannot afford to disregard. Perfect complement for renewables Natural gas is an indispensable energy source, enabling simultaneous development of renewable projects. Low CO 2 emissions Natural gas has the lowest carbon footprint among fossil fuels Eco - friendliness Shale gas exploration in line with the highest quality standards Gas based energy production requires least amount of water. Price competitive energy source Shale gas can ensure the competitiveness of the European economy. Utilization of cheap, indigenous energy sources is especially important for countries which have historically relied on cheap coal. 12

13 However, tapping shale gas potential requires supportive regulatory environment and education Policy In order to stay competitive, EU needs to use competitive, indigenous energy sources (f.e. shale gas) Full benefits associated with shale gas are highly dependant on EU strategic backing Legislation At the moment, there are only limited regulations covering shale gas production Specifically, cost effective methods of shale gas extraction such as fracking require wider acceptance Education Independent reports based on Polish fracking experiences confirm its acceptable environmental impact It is also crucial to base all decisions on objective data concerning shale gas exploration and production and secure proper communication to the public If the aim is a competitive and an eco friendly economy, focusing on shale gas may be the answer. 13

14 Conclusions Natural gas is a versatile fuel fulfilling the basic EU requirements: it is both eco friendly and cost-effective. Technological progress as well as market liberalization facilitate the growing importance of natural gas. Natural gas is expected to become a stand-alone commodity in the coming future. Utilization of natural gas improves economic competitiveness, it can also be used as a hedge to volatile energy sources and thus makes development of renewable energy sources viable. The shale gas revolution in the USA is an example of leverage brought by extensive utilization of natural gas. EU may have significant shale gas reserves as well and can attain similar benefits. However, unlocking shale gas potential requires a stable and predictable in the long run regulatory environment. 14

15 Thank you for your attention Grażyna Piotrowska-Oliwa President of the Management Board