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GPA Europe '19: Execs speak out on sustainability, carbon concerns, LNG market

Adrienne Blume, Editor, Gas Processing & LNG and Executive Editor, Hydrocarbon Processing

AMSTERDAM—Day 2 of the GPA Europe Spring Conference opened with an executive panel moderated by Nick Amott, Process Director and Senior Fellow—Process Technology for Fluor Ltd.

Panelists included Ed Daniels, executive Vice President of Strategy and Portfolio for Shell; Andy Lane, Business Development for Upstream Exploration and Production at BP; and Alain Poincheval, Managing Director of TechnipFMC and President of the Paris Operating Center within EMIA.

Attacking climate change from the frontlines. Mr. Amott led off by asking the three executives about climate change and how companies should lead the charge to combat greenhouse gas emissions.

Mr. Lane noted, "There's a massive groundswell of energy within the [oil and gas] companies themselves to do something about climate change." Lane said that when he asked for internal volunteers at BP for a project to address climate change, he was "nearly trampled … There's a lot of motivation out there, and it's not just the millennials," he said. "I think it's the industry's job to play a significant role in [mitigating climate change] and to be part of the solution—but not to set the agenda."

Mr. Poincheval noted that consumption of coal is still increasing in 2019. Contractors, together with technology suppliers, must reduce the capital cost of LNG projects so that clean power can successfully compete with coal, he said.

Mr. Daniels said that public looks to major companies to answer the challenge of climate change. "If we don't address climate change, then it fundamentally impacts our license to operate," he explained. "There's also a morality element to it—it's just the right thing to do." However, there is also a balance that needs to be struck between environmental stewardship and delivering promised returns to shareholders, he noted.

Balancing climate stewardship with ROI. Lane continued on this theme, asserting, "If we stop investing, we start declining. Under whatever climate scenario you subscribe to, there is a continued need to invest in oil and gas production. We are producing an exhaustible resource. But do we need to do that in a responsible way? Yes. Do we need to do that in a carbon-sensitive way? Yes. We can't afford to stop investing; it's a question of how we invest, and how to do it in the most efficient way."

"The [public perception] is a real problem that we have to solve," Poincheval said. "We have to move from being 'oil and gas providers' to being 'energy providers." TechnipFMC believes in exploring all sources of energy and offering hybrid technology concepts, such as conventional hydrocarbons along with renewable energies. "As a service provider, we can then offer a more complete solution," he said.

The push for sustainability. Amott then moved to the topic of sustainability. Poincheval noted that the challenge for the oil and gas industry for the next 30 years is the formation of a cyclic, sustainable business. This business model would include initiatives such as carbon capture to mitigate emissions from production, tree replanting to replace forest lost from land cleared for operations, water recycling and other sustainability methods.

Lane spoke about the growing need for electric vehicles. Heavy vehicles, airplanes, and power generation are difficult to decarbonize; light vehicles are easier to decarbonize. "In European gas, you're in a business that's going out of business unless you do something about it," he asserted.

"How are we going to decarbonize heat? That's not easy. How do we decarbonize plastics, heavy vehicles, airplanes—that's the more difficult stuff. Frankly, we haven't scratched the surface of that. We've scratched the surface of power, but we need to go much further," Lane said.

European shale prospects. On the question of shale oil and gas development in Europe, Lane commented, "Shale gas is over in Europe. It never really started. There's a lot of land in West Texas; but the population density in Europe is too great. And it's not societally acceptable here—that's my personal opinion."

Daniels noted, "I think there's a danger in thinking that all shale gas or shale oil is the same. [In Europe] we have the mineral rights issues, where people who own the land don’t own the rights to the minerals under the ground, unlike in the US. I think it's a shame if we don't try to develop shale in Europe, but at the same time I think the train has left the station."

LNG market direction will be dictated by price. Amott then asked about what kind of price structures make LNG projects viable. Poincheval said, "There are many crazy players on the market today because gas is cheap, especially in the US. There are a few different approaches being seen, such as in Africa with Mozambique."

"Delivered cost of LNG [the to the customer] is the thing that makes the difference," Lane remarked. "The US has more gas than it knows what to do with. This effectively sets a global LNG price benchmark. You can transport that gas any way you want to, and that price influences the price in Europe and in Asia. Countries do not have a right for their reserves to be developed. New LNG projects will only come to be if they can commercially compete with that US gas price."

"Will all these LNG project happen? No, they won't," Lane continued. "Only the best ones will, and that's the competitive environment that we all play in. It's natural selection. It's partly due to the commercial resource, partly due to the cost structure and financing, partly due to the site location and how it will be operated. But what it comes down to is: Can you put gas on a ship, send it out and make a profit on it? The answer is cost, cost, cost. The US is setting the price. Being able to deliver LNG for $6 or $7, instead of $16 or $17, opens up many more markets and customers."

On a cautionary note, Daniels added, "The 'Achilles' heel' to [LNG] is methane slip. After you get past 2% methane slip from end to end, then you are starting to get worse [with respect to emissions] than coal, and our opponents and detractors may use that against us."

The three executives also reported increasing challenges in recruiting the right resources. Daniels said that the industry must work harder at selling the opportunity. The world needs energy, it must lower its carbon emissions and it will need to develop new technologies to meet energy needs. A large opportunity exists in taking part in combating climate change.

The GPA Europe Spring Conference is taking place at the Shell Technology Center in Amsterdam, the Netherlands, from 15–17 May.

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