LNG, serving new European markets where power is needed

Natural gas production accounted for just a third of Total’s output ten years ago, however in 2016 it was recorded at over 48%. This dramatic growth reflects Total’s choice to meet the challenges of climate change and support growth in global energy demand.

Being part of the world's fourth-largest international oil and gas company as well as part of the Executive Advisory Board at the 2017 European Autumn Gas Conference (EAGC), Guy Broggi shared his valuable and insightful knowledge with Gastech Insights on where he sees the new LNG supplies coming from and exactly what effect the recent political changes will have on the industry. 

Gastech Insights: What is the gas industry doing to stimulate new demand and create new markets in Europe?

Guy Broggi: Currently, it is not easy to rely on new power generation to stimulate natural gas demand in Europe. In the power sector, new gas demand could come only when, and if, coal power generation declines. In the future, the only new demand in Europe’s transportation system is with trucks or ships bunkering, with companies providing customers with LNG instead of diesel or fuel oil.

In Europe, new policies on CO2 prices or lower natural gas prices are needed to put the power sector back as a solid reason for growth. I believe the industry could do something, but it is currently looking to the wider world through LNG and serve new markets where new power is really needed.

Gastech Insights: Excluding U.S LNG which has recently come online, where do you see new supplies coming from - Iran, Azerbaijan, even Canada?

Guy Broggi: I would say all of them eventually, however, not at the same time. US LNG was the first to arrive and possibly the most significant new LNG available. Canada could be a very good candidate and gas from Eastern Canada may eventually come to Europe.

With Azerbaijan, the supplies will come through the Southern Gas Corridor. However, as far as Iranian gas is concerned, I would say that Europe is not the best market, due to the long distance, other competitors and low demand growth. Iran needs gas for their own domestic consumption and there are closer countries in the Middle East that would be happy to welcome Iranian gas. Geographically, Europe is a little too far away, unless you consider LNG, but the LNG sector in Iran is not their top priority.

Gastech Insights: What are the main factors for the development of an LNG hub in Europe?

Guy Broggi: LNG hubs are a popular topic to discuss, as they can be close to the natural gas hubs in Europe. There is currently no such thing as a European LNG index, however, the industry is considering the Gulf of Mexico as the best place to have a FOB type of index. This is because it’s where extra LNG will come from before anywhere else. Apart from Qatar where there is no hub for the time being, I believe the US will be the better place to have a hub for Europe with FOB prices “Gulf of Mexico”.

Gastech Insights: What impact will recent political changes have on the European gas industry?

Guy Broggi: In Europe, the question is, will Brexit mean a real “Energy Brexit”? I do not think so because the energy system is already well unified with German and French companies producing electricity in the UK. These European companies and the UK will continue to do business together, so whatever Brexit means on the political level, I cannot see any big impact on the LNG sector.

With Trump’s election, the only thing which could be very detrimental to Europe would be a change in the way fracking is viewed in the US or another policy for exports. Assuming that exports could be forbidden, then it would change the face of the world as we see it now. After seven months of Trump’s Presidency in the US, the LNG sector is feeling supported. The US can assume a top-ranking position in LNG exports, with Europe as a serious destination among the other US allies which have commercial imbalances to tackle.

Gastech Insights: What do you enjoy most about the EAGC Conference?

Guy Broggi: The EAGC has a familiar, warm and knowledgeable atmosphere consisting of very well-known European companies. There is always a high standard of presentations and panel discussions with speakers who truly understand the industry and that is why we attend year on year.