Natural gas can help safeguard the planet: it can become the world’s major energy source, be a factor for peace and help save the climate, says Jérôme Ferrier, President of the International Gas Union (IGU) and the French Gas Association in an interview with Energy Post. But, he adds, to enable gas to fulfill these roles, policymakers will have to make a clear choice in favour of gas over oil and coal. “They have to discriminate!”
It is a “lucky concidence” that the global gas sector will get together in Paris next week, at the world’s biggest gas event, the triennial World Gas Conference (WGC), says Jérôme Ferrier. As President of the International Gas Union (IGU), he will be host next week to Laurent Fabius, the French Foreign Minister, who will in turn host the crucial COP21 climate conference in Paris later this year. This will be a “dramatic opportunity” for the gas sector to make world leaders aware of the key role gas can play in limiting global warming, says Ferrier.
Ferrier, who proudly calls himself a “gas man”, having worked for almost 40 years in the gas business for Elf and Total, rejects the idea that most gas resources could become “stranded assets” in a low-carbon future. The scenarios from the IPCC, the UN climate research organisation, on which this idea is based, “fail to discriminate between fossil fuels”, he says. “You cannot equate gas with coal or oil. You have to discriminate!”
“60% of conventional gas reserves are in four countries: Russia, Iran, Turkmenistan, Qatar”
He points out that the scenarios from the IEA (International Energy Agency), which do allow for the lower CO2 emission factor of gas compared to the other fossil fuels, show growth for gas until 2035. “We will need all the energy we can get in the world if we want to develop”, says Ferrier, who worked for many years in Africa and Latin America. “You cannot do it all with renewable energy. You will need nuclear power and fossil fuels – and that means gas above all.”
The great challenge for the major nations of the world now, says the gas man, is to switch from coal to gas. “The US and China have already embarked on that road. We hope they and others will confirm that in Paris.”
Ferrier says there are plenty of reserves to enable a global transition to a gas-supported sustainable energy system. He does acknowledge that the distribution of conventional resources is heavily concentrated at the moment. “60% of conventional gas reserves are in four countries: Russia, Iran, Turkmenistan, Qatar.” Here is where the development of unconventional gas could be important, he says. “The largest shale gas resources are located in countries such as the US, Mexico, Argentina, Algeria, China and Australia. Geopolitically this is very exciting. Non-conventional gas will increase diversification.”
“We have a constructive dialogue with Greenpeace Germany. They are aware that we need gas to complement renewable energy”
Ferrier does not expect an American-style global unconventional gas revolution. He rather sees an evolution taking place. “Countries with a core tradition for coal power, such as China and Australia, which have domestic shale gas resources, have decided to follow the US example and make a switch.” In addition, Ferrier sees opportunities for expansion in conventional gas production, e.g. in Eastern Africa and the Eastern Mediterranean.
The growing importance of gas in the world’s energy system will catapult the “cleanest fossil fuel” to the top of political agendas, and increasingly put gas in the public eye, observes Ferrier. This is why, when he became President of the IGU in 2012, he took a number of initiatives to foster better relationships with governmental and non-governmental institutions.
Under Ferrier’s watch, the IGU signed a Memorandum of Understanding (MoU) with the World Bank Group, principally to help African countries develop their gas business. The IGU also signed MoU’s with the International Peace Institute in the United States and the United Nations Economic Commission for Europe, and “developed relationships” with UNIDO (United Nations Industrial Development Organisation) and UNESCO.
“We also have a constructive dialogue with Greenpeace Germany”, says Ferrier. “They are aware that we need gas to complement renewable energy, and that it makes sense to use the existing gas infrastructure to do so.” Relations with Greenpeace France are “more sensitive”, Ferrier adds. “The Germans are more pragmatic.”
In addition to its emission-reducing role, gas can play a positive role as a factor for peace in the world, Ferrier believes. This is because gas is a “longer-term business” than oil. “It requires physical infrastructures, be it pipelines or LNG trains, which connect buyers and sellers over a longer period. It is also more capital intensive: these projects easily cost tens of billions. So there is a common interest to protect these investments and make them profitable.”
“At the end of the day a captive buyer and captive seller will develop a strong relationship”
Such common projects can be a “stabilising factor” in the world, argues Ferrier. “At the end of the day a captive buyer and captive seller will develop a strong relationship.” Russia, he notes, has been a stable supplier to Europe with very few exceptions. Similarly Algeria continued to supply Europe at times of crisis, like in 1994. “Gas commitments were respected.”
Given the nature of the gas business, Ferrier is convinced that over 50% of commercial relations will continue to be based on long-term contracts. “Today this is roughly two-thirds. One-third of gas traded on international markets is LNG based on spot markets. That can still grow. But the gas business is not compatible with a full spot market.”
Similarly Ferrier believes gas prices in the world will converge, but there will not be a perfect alignment as in oil. The recent decline in oil prices has already led to some convergence. Asian gas prices, which are still strongly linked to oil prices, have declined strongly. US prices, which were far lower and unrelated to oil prices, have stayed the same. Europe is in between those two extremes. European gas prices have gone down, but not as much as in Asia.
Ferrier believes the prospects of the European gas market have become a bit brighter recently. He detects a changed attitude towards gas among European policymakers. “Until recently gas was ignored in EU energy policy. Now for the first time, in the Energy Union plans, we can see clear objectives not just for electricity but also for gas development. There is a focus on better interconnections, infrastructure, security of supply, diversification. Gas is mentioned. That’s very important.”
“This is not the right time to build a 65 bcm pipeline in Europe”
Investors need “clear conditions”, says Ferrier. “We need a clear policy on diversification. On coal power. And on carbon emissions – to justify investment in carbon capture and storage.”
Ferrier believes that if EU policymakers get it right, the gas business in Europe will be able to grow again. At this moment business is still depressed. He notes this was the reason behind Gazprom’s cancellation of South Stream. “That decision was based on market considerations. This is not the right time to build a 65 bcm pipeline.”
But he believes that this will change. In future Europe will need gas from countries like Iran, Turkmenistan and Azerbaijan, he says. This means “new lines” will need to be built from these countries to Europe. “If the EU sets out a clear gas policy, we will need a new Nabucco.”
Who is Jérôme Ferrier?
Jérôme Ferrier started working in the gas business in 1976, with Elf Aquitaine. He worked on the first LNG projects in Africa back in the 1980s. In 2002, after the merger between Total and Elf, he became Director for the Americas at Total Gas & Power. Later he became representative of the Total Group in Argentina. At the end of 2008, he became Senior Vice President for Corporate Security at Total’s Head Office, where he was responsible for handling international crises, such as the Arab Spring and the Fukushima disaster. Total, he notes, is active in some 130 countries in the world. In 2008, he was elected president of the International Gas Union (IGU) for 2012-2015, which he says is “a full-time job”. He is also President of the French Gas Association.
Every three years, the members of the IGU elect a person, city and country to preside over the IGU and host the triennial World Gas Conference. These elections are based on one country, one vote, and involve strong competition, says Ferrier.
He has had three main objectives as IGU President. First, “to enlarge the gas family”. Under Ferrier’s Chairmanship, the number of member countries of the IGU went up from 76 to 91, especially thanks to a new influx from countries in Africa and Latin America. Second, “to develop gas advocacy”. “In the past the gas community spoke to the gas community. I have tried to change that, to orient messages to political leaders, the media, industry.” Third, to achieve “better dialogue with governmental and non-governmental institutions”. “Gas is gepolitics”, notes Ferrier. He cites a number of initatives the IGU has taken to improve relations with institutions such as United Nations organisations and the World Bank.