The chief executives of BP, ExxonMobil and TotalEnergies have issued a rallying cry for urgent investments in natural gas projects to help meet growing global demand.
Speaking at the Russian Energy Week conference in Moscow, Bernard Looney, Darren Woods and Patrick Pouyanne — the three supermajors' respective chief executives — said demand for gas will continue to increase even as the world moves towards cleaner sources of energy.
The trio presented their views in response to the unprecedented rise in spot gas prices in Europe and Asia — a trend that some say could threaten the energy transition as some nations turn to coal to address energy needs.
Executives have linked the high gas prices with the supply shortfall that has been expanding at a pace as economies rebound following the Covid-19 pandemic.
The energy crunch, which came after a period of below-par winds in northwestern Europe, has also highlighted the intermittency of some supplies of renewable energy.
Pouyanne said that while international oil and gas majors should continue to invest in renewable energy, they must “invest even more into gas” to compensate for the natural decline at existing fields.
He warned that if “we do not invest, gas production may decline at the rate of between 3% to 4% per year".
Looney stressed that “this [gas price] crisis reminds us that energy remains the lifeblood of society”.
“The use of energy is going only one direction – upwards. We need redundancy. Energy has to be clean and affordable but it must be reliable. We need to deal with the intermittency of renewables,” he said.
Looney argued that the way to deal with energy supply intermittency is to invest in "long-term natural gas contracts because gas is a key balancer in the system and a key provider of redundancy".
"It also means investing in storage because storage capacities have dropped, and in the diversification of energy sources.”
From the supply side, companies are “doing all they can,” he said, but added that “at the end of the day, if supply goes away and demand does not change, there will be just one consequence — price rises."
"We need to address the issue of demand, with supply and demand having to work together," Looney concluded.
Woods said that while the supermajors will produce less hydrocarbons as time goes by, “even in the declining or flat markets, we need to generate investment to backfill the decline in [gas] production”.
“With the Covid-19 pandemic and energy transition, considerably less investment went into replacing depleting [gas] supply," he pointed out.
"As result, a lot less product is available to a market that is now rapidly growing; (when) more supply comes in, then we will see a decline in prices.
“Governments are trying to reduce demand for fossil fuels. However, if we do not balance the equation of supply and demand and only address the supply, it will lead to additional volatility,” Woods warned.
“We need to have thoughtful policies that will recognise the importance of natural gas and manage this transition with both redundancy and backup (energy sources)," he said.
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