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INTERVIEW: Eurogas urges dialog with gas suppliers over methane emissions

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INTERVIEW: Eurogas urges dialog with gas suppliers over methane emissions

Highlights

Questions concept of penalizing external suppliers

Calls for renewable gas target in EU legislation

European gas demand set for stable run to 2030: Watson

London — The EU should bring its external gas suppliers to the table for dialog over how best to manage methane emissions, rather than look to impose any kind of penalty on significant emitters, the secretary general of industry body Eurogas said in an interview.

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James Watson told S&P Global Platts that the idea of penalizing suppliers for having an inferior methane emissions footprint risked alienating those suppliers.

The European Commission plans this year to bring legislative proposals on how to best tackle methane emissions -- which are significantly more polluting than CO2 -- from upstream operations.

While the initial focus will be on legislation for measuring and verifying emissions, the EC in its methane strategy published in 2020 said that if producers did not make "significant commitments" to cutting methane emissions, it would consider proposing legislation on targets, standards or other incentives to ensure lower emissions for fossil gas used in the EU.

"I find it very difficult to see how this can actually fly," Watson said, adding that imposing a tax or penalty on an external gas supplier to the EU could run into difficulty in terms of WTO rules.

Watson said a better way to tackle external methane emissions would be through international negotiations.

"We can sit down and talk about the methane issues that need to be tackled. We don't need to worry so much about methane supply indices," he said.

"As soon as you start trying to reward people for being good and punish people for being bad, they will retaliate," he said.

"It is much better to work with people and say, 'we're a big consumer of gas and we'd like to work with you to make things better'. You've got a much better chance of getting people to the table and then taking action."

Renewable gases

The EC is also looking to propose changes to the renewable energy directive in 2021, and Watson said Eurogas was calling for the role of gas to be recognized.

"What we are dealing with is the greenest European Commission there's ever been," Watson said.

"When we look at how we see the future of gas, we don't see it in a vacuum. We see a growing synergy with other sectors. What we are thinking is that gas and electricity will become the dominant forms of fuels towards 2050," he said.

"Today, gas is doing its job reducing carbon emissions across Europe, replacing oil in heating and coal in electricity. But gas alone won't get us all way to carbon neutrality. So we're going to need to change gas as well. And so we think under the renewable energy directive, we need more recognition for the role of things like hydrogen and biomethane. And we need Europe to start really embracing that change sooner rather than later."

Watson said Eurogas was calling for a renewable gas target of 11% in final gas consumption by 2030 under the renewable energy directive.

"We also believe there should be a decarbonization of gas in general. And so alongside that renewable target, we're calling for a 20% greenhouse gas intensity reduction on a baseline of 2018 by 2030. This will help us also deliver hydrogen... derived from natural gas and coupled with CCS," he said.

"We see that these two tools will give us a pathway to start investing in the types of gas that we want to have by 2050. And if we do it now, it will cost less than if we wait until 2030 and start acting then."

European demand

In the meantime, Europe is likely to remain dependent on gas imports -- both from its traditional pipeline suppliers such as Russia, Norway and Algeria, and from LNG -- as domestic conventional gas production declines.

But demand is set to remain steady at least over the next decade, Watson said, despite the growing resistance to fossil fuel usage in Europe.

"By 2030, we expect the gas market to be more or less the same, with only a very slight decline compared to consumption in 2019," Watson said.

"Gas will definitely be a fuel of the 2020s. In fact, you could even argue that it will be the fuel of the decade. I think we will see a very robust gas market for the next 10 years at least," he said.

The market and price volatility witnessed in European gas in 2020 came amid a "unique" set of circumstances triggered by the coronavirus pandemic, Watson said.

That volatility is likely to be calmed as demand recovers back to normal levels, he said.

"We expect robust growth and a level of stability to return," he said.