Here are the written highlights of our 2-day 4-session workshop “CHINA: Carbon Neutral by 2060 – The Future of Gas”, compiled by Helena Uhde at ECECP. Here you can quickly see the main points made by our expert panellists. Global events have made gas the hottest of issues, and the implications for both Europe and China are strongly reflected in all the sessions. The four session topics were Security of Supply, CCUS for the Gas Sector, Competitive Gas Markets, and Renewable Gases. Held at the end of September, it was the fifth of our EU-China workshops since the first was held in November 2020, organised by the EU China Energy Cooperation Platform (ECECP, funded by the EU) and produced by Energy Post. As always, leading speakers from the EU, major companies, think tanks and academics took part, with live audience Q&A at the end of each session. Participants came from the EU Delegation to China, SNAM China, Linde, LNG Europe, Agora Energiewende, Hankuk University, Boston Consulting Group and more. To access the full videos as well as Uhde’s full summaries, click here.
### As part of the workshop, Energy Post’s Matthew James interviewed Andrea Stegher, Vice President of the International Gas Union where he explains how “we need every instrument at our disposal to fight climate change”. Click here to watch the video.
Day 1: Security of Supply
Counsellor, Energy and Climate Action, EU Delegation to China
Chairman and CEO, SNAM China
Vice President, R2Gas
President, LNG Europe
Since last year, the gas market has changed significantly, with a very different situation in the EU and China. Whereas the EU is trying to become independent from the largest supplier, Russia (supplied 45% of total gas demand in 2021), China has a more diversified supplier arrangement. Due to the Russian invasion of Ukraine, Europe is facing significant supply shortages.
Current situation in Europe
- In 2021, Russia was the largest supplier of gas to the EU, accounting for 45% of total gas imports (pipeline and LNG).
- Due to the Russian invasion of Ukraine, Europe is facing significant supply disruptions. Urgent actions are required to stabilise security of supply in the EU, i.e., diversification of supply. In the long-term, demand could be covered by domestic renewable gases.
- Large price differences for natural gas in Europe compared to Asia and North America could lead to economic downturn and disturb social balance.
- REPowerEU plan – EU’s response to Russia’s invasion in Ukraine, aiming to reduce demand for Russian gas by two-thirds by the end of 2022 by reducing gas demand, diversifying supply and boosting gas storage.
- Under the European gas demand reduction plan, Member states agreed to reduce their gas demand by 15% until spring 2023.
Current situation in China – China’s 14th Five Year Plan (FYP)
- Gas is key to meet China’s dual carbon targets. China’s gas market is mainly influenced by the 14th FYP, which emphasises the role of LNG.
- China’s approach to security of supply focuses on strong diversification of suppliers, while maximising the use of domestic resources.
- China signed long-term contracts with major LNG suppliers (USA, Qatar) years ago.
- Infrastructure and storage capacity are currently insufficient – which is why there are ambitious scale-up targets.
- In 2020, Pipechina was founded, to be a major player in the transition from coal to gas.
Link between Europe and China
- China’s LNG imports from Russia increased significantly in the last six months during the war. At the same time, China has started exporting LNG to Europe, about 7% of EU’s LNG imports come from China.
- However, China bought only 7.6 bcm of gas from Russia – a small fraction of what Russia should supply to Europe under normal market conditions and the purchases were already planned years ago.
- China is not seen as a substitute market for Russian gas from European gas fields, as the transport would be too costly because of the geographic distance.
Day 1: CCUS and the Gas Sector
Benoit de Guillebon
Project Lead, Pycasso
China Expert, Agora Energiewende
Lead Analyst, Centre for Research on Energy & Clean Air (CREA)
Moderator: François Issard
International Energy Consultant and China expert
Carbon capture, utilisation and storage (CCUS) has a huge potential for carbon footprint control and removal, especially in hard to abate sectors, such as steel, chemicals, fertiliser and manufacturing. Individual CCUS facilities capture CO2 1-2 Mt/yr. If scaled up, capacities of CO2 5-10 Mt/yr could be reached.
In the last 20 years, CCUS technology has been developed mainly in the form of demonstration projects; it is a proven technology, but widespread application is yet to come.
As CCS and CCUS projects take time to implement, it is important that incentive schemes are politically stable and credible in terms of long-term price development.
It is a question of economics: There are many options to incentivise CCUS, such as financial support, CO2 pricing and regulation. Carbon markets already give price signals to industry, i.e., CO2 prices of around €80/tonne in the European Emissions Trading System (ETS). In China, the carbon price is not yet high enough to justify the cost efficiency of the CCUS value chain.
Day 2: Competitive Gas Markets
Expert, Asian Gas and LNG Market and research professor, Hankuk University of Foreign Studies
Senior Advisor European Energy, Walter Boltz Consulting
Managing Director, Maycroft
This year’s gas market is characterised by a slowdown in gas consumption and a stronger focus on security of supply. Due to volatile gas prices as well as interruptions in gas supplies, security of supply has become even more central. Unstable market conditions are pushing climate goals into the background, and the importance of coal remains given its price and the relative abundance of supply and production.
There is strong competition in the energy market as LNG is supplied to Europe as an alternative to Russian pipeline gas – the switch to pipeline imports to Europe from other suppliers is only possible in the long term.
Volatile gas prices, which depend on the geopolitical situation and perceived changes in the future, have a serious impact on the electricity market.
Europe’s gas market
- Europe’s gas market is facing a gradual decline.
- By paying the highest prices, Europe has been able to attract gas from other sources.
China’s gas market
- China is expected to focus on all kinds of fuels, including coal, to enhance energy supply and security.
- Growth in China’s gas consumption is slowing. Sluggish domestic gas consumption and high prices lead to a decline in LNG imports.
- High prices affect not only China, but many countries in the Asia Pacific market. While the share of gas is still relatively small in China and other Asian countries, it will play an important role in meeting a fast increasing energy demand and by replacing coal to meet the climate goals.
Day 2: Renewable Gases
Joachim von Scheele
Global Director Commercialization, Linde
Biomethane Lead, SNAM China
Energy Director, CEFIC
Senior Expert Hydrogen Economy (MENA Region), Fraunhofer
Moderator: Erik Rakhou
Associate Director, Boston Consulting Group
Russia’s invasion of Ukraine has led to a complete restructuring of gas markets, making LNG an immediate solution. Europe and China are sticking to their decarbonisation goals despite challenges. European policy targets the increase of renewable gas and hydrogen imports by 2030, as well as power-to-gas.
If the current hydrogen targets are met, Europe could be the leader for hydrogen in terms of percentage of the mix replacement by 2030. In China, around 5-6% of the energy mix will be replaced by 2030.
The certification of hydrogen and other renewable gases is not yet complete, and a uniform system is lacking. Transporting hydrogen and other renewable gases is a challenge, and the question of whether it is more beneficial to transport the end product is controversial. Transport should be included in the sustainability rating of the gases.
Current situation in Europe
- By 2030, 50% of the hydrogen consumed by the industry is to be renewable. However, the question of how this will be achieved is still unclear.
- About 10% of Europe’s natural gas consumption is used by the chemical industry, of which 56% is used for energy purposes, and the remaining 44% as a feedstock and for ammonia production.
Renewable gases in China
- The target for annual biomethane production in China is 10 bcm by 2025 and 20 bcm by 2030 (NDRC, 2019).
- The hydrogen plan of China’s 14th Five-Year Plan contains a rather moderate target for hydrogen production of 100,000 to 200,000 tonnes by 2025.
ECECP is funded by the European Union