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Gas industry must plan for long term even as demand surges today - BP executive

The U.S. natural gas sector should view federal and state energy policy developments as critical to the industry's future just as much as the extreme supply and demand conditions that are driving "unprecedented volatility" in global energy markets, according to BP Energy Co. Inc. President and CEO Orlando Alvarez.

Alvarez's comments during an Oct. 12 keynote address at LDC Gas Forums' Gulf Coast Energy Forum underscored how a series of policy changes have created fresh uncertainty and new opportunities for the industry. Navigating the regulatory landscape and improving the industry's climate footprint should remain priorities even as energy security issues and costs remain in the spotlight and global demand for U.S. liquefied natural gas exports continues to surge, the executive said.

"We are in unprecedented times for the energy markets, including natural gas," Alvarez said. "You can blame the Russia-Ukraine conflict, but it's broader than that. It is the broader energy transition aspirations and all the policies that come along with it. Regulations and policies are just as important as any other market fundamental."

Turbulent market

Alvarez, who heads BP PLC's North American gas marketing and trading business, also cited supply chain disruptions, occurring as global energy demand recovers from pandemic lows, as another factor behind the price volatility that has global policymakers looking for relief and, in some cases, considering market intervention. But the BP executive encouraged conference attendees to see decarbonization as a sustained trend, even if the energy crisis following the Russia-Ukraine conflict reduces near-term pressures over greenhouse gas emissions.

"Policy is not moving as fast, but it is moving," Alvarez said. "What we are trying to get to is a balance between abundant, reliable, clean energy that is making steps towards the transition. But gas has a role. We have got to make sure that, as an industry, we keep saying that. You can't do it all. You need natural gas. There is a lot of uncertainty that's going to play out."

Policy push

Alvarez pointed to policy developments at the U.S. state and federal levels aimed at reducing overall emissions, including an increasingly difficult permitting environment for pipelines in places such as the U.S. Northeast, a push to increase overall electrification, and a movement playing out in some parts of the country to prohibit natural gas in new buildings.

The Inflation Reduction Act recently passed by Congress will likely push decarbonization efforts forward with billions of dollars in federal spending on energy projects. But the law, along with previously enacted bipartisan infrastructure legislation, also creates opportunities for the natural gas sector to invest in carbon capture, hydrogen production, biogas and other technologies that could bolster the case for the industry's long-term role in the energy transition.

Alvarez encouraged natural gas market participants to continue to make investments to reduce planet-warming emissions, to decrease water usage and to apply other technologies to improve the sector's environmental footprint. The executive also emphasized the importance of the emerging trade of natural gas certified as lower in planet-warming emissions.

"The traditional value chain is changing," Alvarez said.

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