Gas: Squaring Security, Affordability and Low Emissions - Mike Bradshaw, Warwick Business School, and Christophe McGlade, UCL

Gas: Squaring Security, Affordability and Low Emissions

Mike Bradshaw, Warwick Business School &Christophe McGlade, UCL Institute for Sustainable Resources

Staying on Target: Securing the UK’s Energy Future in Challenging Times

30 April 2014.

Security Affordability

Low Carbon?

The Gas Trilemma

Click to add titleUK Natural Gas Trends 1990-2012

Source: DECC

Imports >Production

Click to add title

“There is no perfect definition of energy security. When discussing energy security the (UK) Government is primarily concerned about ensuring that consumers have access to the energy services they need (physical security) at prices that avoid excessive volatility (price security).

DECC (2012) Energy Security Strategy, p. 3

Security and Affordability

Click to add titleTHE UK’S CONTEMPORARY GAS

BALANCE

**

VECTORS

1.UK Continental Shelf2.Norwegian Continental Shelf3.Interconnectors (IUK & BBL)4.Liquefied Natural Gas5.Exports to Ireland6.Domestic gas storage7.Domestic unconventional gas?

?

Source: DECC (2013)

UK LNG Imports

LNG Facility Ownership Capacity 2012 %

Dragon LNG (Milford Haven)

BG Group: 50%Petronas: 50%

6bcm 1.2%

South Hook(Milford Haven)

Qatar Petroleum Intl.: 67.5%ExxonMobil: 24.15%Total: 8.35%

21bcm 73.4%

Isle of Grain(Essex)

National Grid (Sonatrach, GDF-Suez, Centrica, E.ON Ruhrgas, and Iberdrola)

20.3bcm 25.4%

OthersAlgeria, Egypt, Nigeria, Norway,

LNG = 46.8% Of UK Gas Imports in 2011 and 19.2% UK Gas Imports in 2013p.

Click to add titleInternational gas price divergence

Source: BP Statistical Review 2013

Click to add titleUK Global Gas Challenges

Source: National Grid 2013

Gone Green 2013

A Supply Chain Approach to UK Global Gas Security

Security Affordability

Low Carbon?

The Gas Trilemma

Click to add titleExport volumes are severely impacted by

maintaining oil-indexation but helped by an ambitious climate agreement

• Using TIAM-UCL, we modelled two different structures of gas markets in scenarios with different long-term temperature increases • A continuation of existing regionalised prices• A global gas price based on gas supply/demand fundamentals

• Defending oil-indexation in the short-term will lead to a destruction of export markets over the longer term

• Total exports, particularly LNG, are larger under a 2oC scenario• If countries or companies want to expand gas exports, they should actively

advance an ambitious global agreement on GHG emissions mitigation

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Gas exports in 4oC scenarios

Australia Global gas priceCIS Regionalised gas priceMiddle East

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Gas exports in 2oC scenarios

Australia Global gas priceCIS Regionalised gas priceMiddle East

Click to add titleNatural gas can act as a transition fuel globally but its potential varies by region

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• We say that gas can act as a bridge to a low-carbon future for the time when consumption is rising in a 2oC scenario and when consumption is greater than in a 4oC scenario

• Under this definition, gas can act as a transition fuel to a low-carbon future on a global level out to 2035

• But this does not mean gas can play this role within all regions. For example:• Strong potential role for gas to act as a transition fuel in China, Japan and South Korea• But almost none in Africa, Canada, Central and South America, the Middle East and Mexico

Click to add titleCoal must be curtailed, but gas-for-coal substitution alone is not sufficient

• The increased use of gas needs to be accompanied by an even larger decrease in coal consumption if the global temperature target is to be achieved

• Classifying gas as a transition fuel needs a convincing description of how global coal consumption will be curtailed, or emissions from the increased use of gas will be additional to those from coal

• Gas only ‘displaces’ coal in early periods (up to 2015), afterwards efficiency and low-carbon fuels are more important than gas in replacing the drop in coal consumption

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Click to add titleWithout carbon capture and storage, gas’s potential role is drastically reduced

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4oC scenario

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2oC scenario

2oC scenario with no CCS

• If carbon capture and storage (CCS) is not available, global gas consumption peaks much earlier

• The absence of CCS therefore shortens the natural gas bridge by ten years, and also results in the subsequent need for a very rapid decline in consumption

• Multiple uncertainties and challenges exist over whether CCS will be technically viable, but the commercialisation of CCS is crucial for the future role of natural gas in a decarbonised energy system

Security Affordability

Low Carbon?

The Gas Trilemma