A long transition

Malaysia

TOGY talks to Menelaos Ydreos, the executive director of public affairs at International Gas Union about the development of renewable energies and subsidy reform in Malaysia. International Gas Union is a nonprofit organisation that promotes gas as part of a sustainable energy plan. The union has members in 91 countries.

How will hydrocarbons continue to contribute to the energy mix?
There is no doubt that hydrocarbons will have a very significant place in the world economy well into the future. There is no technology available currently that will enable us to leapfrog to a completely renewable world without going through a very long transition from the current situation. The initial step of this transition will be a shift in the fuel mix. Natural gas, with its environmental attributes, will lead that shift. In the long run, we expect to see decline in heavier carbon fuels, like coal.
One of the most exciting areas of opportunities for gas is in the transport sector. We are seeing tremendous innovations occurring in the marine sector. People underestimate how much energy is used in the transport and marine sector. Most of the conversation about energy transition is around how we are going to generate electricity. We forget to talk about: transportation, industrial use, raising the standard of living particularly of those who have no access to energy, and all of that.

What are the aspects to consider when choosing to invest in gas assets?
Cost and time of construction and, obviously, investment risk sharing. This is where gas has an advantage. We have to consider whether or not policies are enhancing security of demand so that the necessary investments can be made. We cannot say for any moment that we have to completely eliminate any particular source of energy. Having many options is good.

Do you think that subsidy reform and removing subsidies is an appropriate policy? Do you have any comment on other strategies that could be applied to re-balance the market?
The G20 has been looking at this for a number of years now. The first plenary session at COP 21 was dedicated to the elimination of inefficient fossil fuel subsidies. It is difficult to define what you call a subsidy and what you define as an inefficient subsidy. We agree that inefficient subsidies should be eliminated. We support the notion that most inefficient subsidies benefit the rich and not the poor. The people that these subsidies are intended to help are not helped by them.
The argument is that if you remove the subsidies, you can target a much more efficient way of dealing with the poor and access to energy. I agree with that statement. We are against inefficient subsidies. We agree that any subsidy below domestic production cost is in fact a subsidy that is inefficient. G20 has made some progress, but it is such a difficult issue that more focus is needed.

Do you think there will be anything that will be a market changer either for raising efficiency or some alternative use like LNG in shipping?
The natural gas industry is witnessing remarkable, game-changing innovations.
The level of innovation that has taken place in the extraction of shale gas has been absolutely phenomenal. We are getting twice as much productivity out of a single well than we had just a few years ago. We are reducing the environmental impact through approaches such as green completions that have led to the 70% reduction of emissions in just a short few years. It is a story that needs to be told.
There are some breakthrough technologies that are being developed that are going to be fine-tuned and reduced in cost. Floating LNG is one of those breakthrough technologies. Improvement in engine performance is another area. We are producing engines that have reduced all pollutants from the engine. We continue to see high levels of efficiencies in the conversion of gas to electricity or power in CHP [combined heat and power] applications.
Biomethane is the other area that offers significant promise. Hydrogen gas is another area that will be important. The ability to have a plant that turns the excess capacity that is being produced by wind into a usable form of energy is really important. It supports the deployment of more renewable energies, and that can be very helpful.

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