Natural gas to stay for the long haul beyond 2050: Singapore International Energy Week panellists

[SINGAPORE] With rising energy demand coupled with growing concerns about energy security and resilience, the role of natural gas in maintaining system stability has become more important, and is expected to remain significant beyond 2050.

The energy transition push over the last few years saw natural gas being touted as a transition fuel to facilitate governments gradually shifting their energy mix to be more low-carbon.

But natural gas is no longer just seen as a transition, or bridge fuel, given the energy needs today, with some panellists at the Singapore International Energy Week believing that natural gas will be part of the future.

“We see gas being part of the future, not necessarily only as a bridge fuel, but play much broader role in the near and medium-term future,” said Thorbjorn Fors, group senior vice-president and president for Asia-Pacific at Siemens Energy.

He sees gas playing three key roles: A source of power generation; a stabiliser for the power grid as different sources of energy, especially renewables, come online; and support for decarbonisation since it is the cleanest form of fossil fuel.

Speaking at the same panel, Leong Wei Hung, chief executive officer of SLNG, said that it is not enough that power generators are available and reliable, given the energy demands of industries in Asia. The supply of energy into these generators need to be secure and consistent as well.

“Renewables have a role to play, but definitely gas has a longevity in my view for a long time to come,” he added.

Concurring, Anna Collyer, chair of the Australian Energy Market Commission, said that gas is likely to have a role in supporting the electricity market till 2050 and beyond.

This is even though battery storage solutions is increasingly replacing gas as a peaking fuel in Australia. This means it generates electricity only during brief periods of power demand spikes or when intermittent renewable sources, such as solar and wind, are low.

“What we are very mindful of is those unusual occasions where it’s not for a short, predictable period of time, but a prolonged, unpredictable period of time that we don’t have the renewables that we need, and batteries aren’t really well set up to deal with that. And so, having gas as almost an insurance product is how we see it moving,” she added.

At the same time, governments continue to see expanding renewable energy deployment as the primary means of strengthening energy resilience, especially in the wake of the Iran war.

At a separate panel, Lim Wee Seng, group head of energy, renewables and infrastructure, project finance, strategic advisory and sustainability at DBS’ institutional banking group, said capital is flowing towards investments that strengthen domestic energy supplies, including renewables and gas-fired power plants.

He described this as a “Middle East plus one” strategy, as governments seek to diversify their energy sources following price shocks caused by supply disruptions linked to the closure of the Strait of Hormuz, a major shipping route.

The term is a play on the “China plus one” strategy adopted by companies seeking to diversify their supply chains beyond China after the US imposed tariffs on Chinese goods in 2018, during US President Donald Trump’s first term.

“It is strengthening this home-first in-country (approach), and then how do we then have our ‘Middle East plus one’. This is our ‘Middle East plus one’ moment. Not that Middle East is out, but how do we ‘plus one’?” said Lim.

Sembcorp Industries chief executive officer Wong Kim Yin pointed out that the urgency to enhance energy security has driven up costs for the industry as more options for sourcing energy has to be developed.

With hyperscalers also investing large sums of capital into data centres and artificial intelligence, he said that this has led to “a huge competition for capital”.

Besides competition for capital, there is competition for power generation equipment.

“We are experiencing long lead times in delivery. We are experiencing a supplier’s market in terms of equipment, in terms of cargo. We expect cost pressures will come, and it is a challenge of this industry to manage this cost because other than resilience, sustainability, the other part of the energy trilemma is affordability,” he said.