Renewables Set to Replace Fossil Energies
On the first day of the 5th annual congress of "Iran Petroleum and Energy Club" (IPEC), keynote speakers expounded on the fact that fossil energies were being replaced by renewable energies. Forecasts show that global demand for oil would be on the decline up to 2040, while more gas and other renewable energies would be consumed. Therefore, oil companies are changing their policy to shift towards a greener future.
The following are excerpts from keynote speakers at the conference:
Norway Ambassador:
No Oil Policy
Like Iran, Norway owes its development to oil. The exploration of oil completely changed Norway’s conditions. We moved from a poor European country to one of the richest in the continent. However, we have adopted a cautious oil policy. Oil reserves belong to the entire people and we decided in 1990 to establish a reserve fund, where oil revenues would be accumulated rather than being injected into national budget. That is how we have invested our oil revenue all across the globe in order to prevent any increase in the inflation rate.
Our oil policy is to have no policy. Everything must be based on trade benefits. We should ignore political considerations in oil supply. In that case, we would be able to be an exporter. We are currently supplying 25% of Europe’s gas needs.
Diversity in suppliers is a key point for European Union member states. Over recent years, we have seen how energy suppliers have declined their oil and gas flow for political motivations to use their level of power against customers.
We have also invested in renewable energies. Norway’s oil and gas companies have to adapt themselves with a greener future. That is based on such policy that Norway’s Statoil has been renamed Equinor, and shifted its investment from fossil energy to renewable energy.
We are so lucky that oil and gas was discovered in our country and we are moving ahead by relying on this wealth. We managed to convert our limited oil reserves to permanent assets to be transferred to future generations.
GECF Former Secretary General, Mohammad Hossein Adeli:
Geopolitical Changes and Renewables
Until 2000, gas was mainly used for domestic purposes. Even today, 68% of Iran's gas production is used domestically. But this domestic product has become instrumental as a strategically important international commodity. In other words, in the second half of the 20th century, the role of oil as a strategic commodity has been overshadowed, while gas is taking up added significance.
The gas market structure, which was based on pipeline, has totally changed. Gas has become the topic of international rivalry and tension between top gas producers and consumers like Russia, China and the US.
Data released by international economic institutes show that the global economic growth rate was down in 2019, but it will be up in 2020. However, such growth will not materialize due to the US-China trade war, the European Union and the Brexit issue, US sanctions against other nations and increased geopolitical risks. Nations and companies are exposed to unforeseeable risk conditions. In case the US-China trade war stops, we will witness economic growth in 2020.
Policy changes vis-à-vis gas production and consumption, shutdown of coal-fired power plants in some European nations in coming years, climate conditions and low gas prices among other factors have caused the global demand for gas to grow. That is why the gas structure saw a 5% growth in 2018 from the average 2.5% growth rate recorded for the 2000-2017 period.
Of course, over recent years, gas production has increased significantly due to increased gas production in the US, Russia and Australia. In 2018, the LNG market grew 10% with Asia and Europe ranking the first and the second, respectively.
The European and Asian markets have become a place for US-Russia rivalry in LNG exports. That is why from October 2018 onward, gas prices have been in free fall due to the US-Russia rivalry.
It has to be taken into consideration that 42 countries are currently importing LNG and 20 are LNG producers. Meantime, 25% of LNG exports are supplied on spot cargo basis. LNG contracts are long-term.
Due to geopolitical changes, there is a shift to gas and renewable energies. Different nations are diversifying their energy market and reducing their risk.
OIEC CEO, Gholam-Reza Manouchehri:
21st Century, Age of Renewables
The world is about to experience major changes in the energy sector. All this has occurred over the past ten years. If we can identify these changes we would be able to regain our status for maximizing national interests in the energy sector.
Of course, such factors as price fluctuations, environmental concerns, and obligation of nations to reduce CO2 emissions, the Middle East crisis and regional hostilities, as well as the US-China trade war have impacted global energy developments and made forecasts difficult.
Focusing on climate change has reduced oil and coal consumption, leading to increased gas use. Demand for renewable energies and electric vehicles has increased. Electrification of transport industry, which had a 19% share up to 2005, is now enjoying a 29% share.
Guarded forecasts indicate the increased share of investment in the electricity generation sector and renewables. That is much higher than investment made in the upstream oil and gas sector. Therefore, we see that the geopolitical and energy map of the world is changing. Over the past decade, the costs of producing solar and wind have been significantly cut, and they are less inexpensive than hydrocarbon production.
If we name the 19th century as the century of coal and the beginning of industrial period, and the 20th century as the century of oil and the start of geopolitical developments, the 2nd half of the 20th century and the 21st century would be the period of renewable energies, geopolitical changes and shift in the balance of power.
According to forecasts, by 2040, oil and coal consumption will keep falling while gas consumption mainly LNG, as well as the consumption of renewables will keep rising. Gas and renewables will have a 20% share in the global energy mix by 2040. By 2035, demand for oil will decline in the transport sector, but it will maintain its position in the petrochemical and industrial sectors.
According to international developments, we may plan seven trends for Iran: diversity in upstream companies and contract types, development of renewable energy production infrastructure, development of startups, accelerators and knowledge-based companies, conversion of crude oil and natural gas to refined products and petrochemicals, development of logistics and equipment manufacturing, upgrading efficiency and reducing energy intensity and development of energy products exchange with neighbors.
NIGC CEO, Hassan Montazer Torbati:
Gas Regulatory Body Draft Suggested
The presence of private sector and the significant position of regulatory bodies in the process of revision of gas industry structure is important and effective.
The gas industry, as a networking sector, enjoys special features. The long time spent on manufacturing and the high level of private investment, the long time spent on return, the limited number of suppliers and the necessity of coordination among various sectors of the value chain are among them.
The vertical integrated model, individual purchaser model with regional distributors, rivalry in production and retail sales with regional distributors, production and retail with regional transmitters and distributors are among the gas industry business models.
Meantime, I would like to stress the significant role of regulatory bodies in the process of structural revision. To that end, commercialization, regulation, competition, liberalization and privatization are the most important steps. Protecting consumers and investors are among key regulatory tasks. We (NIGC) have studied the activities of various regulators in the world and achieved interesting results. For instance, the regulatory agency in the US is the Federal Energy Commission whose spending is secured through annual payments by affiliated industries.
In Iran, this task partly rests with the Council of Competition. The government is obligated to take necessary legal action for the establishment of the aforesaid body within three months from the receipt of the Council’s proposal. The financial resources are provided through relations created between components which are affiliated with no organ.
The necessities of establishing a gas regulatory body include the private sector’s demand for flare gas and natural gas trading, structural changes based on documents, and consistence with sovereignty models for the gas industry.