Yacimiento gas natural de Repsol

The role of natural gas in the energy transition

General information - 02/09/2023

Modernising our energy system from top to bottom and effectively reducing greenhouse gas emissions from its production, distribution and consumption is an essential task for the planet's conservation. But it is not an easy goal to achieve, especially given the current high dependence on traditional fossil fuels such as coal and oil. 

It should be noted that although many different low-emission energy alternatives are currently being developed, implementing them throughout society is not yet on the horizon. It is therefore necessary to find other ways to renew and decarbonise energy production in the short term.

It is precisely in this scenario where materials such as natural gas can play a crucial role, especially as it is a resource present on a large scale in our energy system and can therefore act as a link between the old production model and the new, fully renewable system that we need.

What is natural gas?

It is an organic compound made up of a mixture of various gases, mainly methane, which is present in more than 95% of its composition, as established by Spanish legislation. It is one of the most widely used energy sources in our country and is commonly consumed in both in the domestic and industrial sectors. 

One of its most important characteristics is that, of all the fossil fuels currently in use, natural gas has the lowest environmental impact. 

This is the case not only during combustion, but also during extraction, processing and transport. The transformation process from its extraction is also minimal and consists only of a purification phase in which any impurities it may contain are eliminated.  

Positive data such as the fact that its CO2 emissions into the atmosphere are half those of coal or that SO2 (sulphur dioxide) emissions are 2,500 times lower than those emitted by fuel oil make natural gas a very practical asset when it comes to advancing in the energy transition. Moreover, it is also considered a green energy by the European Parliament since last July, so its relevance is now more than evident.

Although speaking about fossil fuels and low-emission energy generation may at first seem contradictory, resources such as natural gas can be excellent partners on the road to decarbonisation.

How it is formed

Natural gas, like other fossil fuels, originates through a process of degradation of organic matter. This happens naturally when several layers of animal or plant matter decompose and, at the same time, are exposed to intense heat and pressures beneath the earth's surface over the course of millions of years. 

For example, we can imagine a lake or sea area where large quantities of organic debris were gradually deposited at the bottom. This waste was buried under very heavy layers of sediment, enduring high temperatures and high pressure in an environment with no air at all. This type of decomposition, called anaerobic decomposition, chemically altered the matter and caused a series of gases such as natural gas to be released.  

Storage and distribution

One of the most useful advantages of this component is directly related to its versatility in being handled in various states. 

The most common form in which we will find natural gas is in a gaseous or dry state, which is easily stored in depleted underground gas or oil fields, aquifers, etc. This gas is transported from the fields to homes or industries by means of pipelines. 

In addition, natural gas can undergo a process known as liquefaction, in which it is compressed and cooled at low temperatures to convert it into a liquid component. In this state it is known as LNG or liquefied natural gas, and in this way, it can be transported and stored by ship over long distances without the need for infrastructure or pipelines. 

Also worth mentioning is CNG, or compressed natural gas, which is used as a vehicle fuel—a more sustainable solution than petrol or diesel—and is formed by storing natural gas at very high pressure.

Uses of natural gas

It is used as an energy source with high heating power in a wide range of areas and can be a good alternative to coal for power generation at all levels. 

Households and businesses
In heating, air conditioning, hot water, for both commercial and domestic use.
Electricity generation
Through combined cycle power plants that work with gas and pressurised steam.
Fuel
For ships and shipping (LNG), as well as for land vehicles (CNG).
Industry
Used in all kinds of industrial processes and fertiliser production.

Long-term outlook for the energy sector

Natural gas is the third most consumed primary energy globally, behind only oil and coal. The forecast for the coming years is that by 2050, gas consumption will remain stable in the market and may move into second place, due to the reduction in coal use and the increase in renewable energies. 

Gráficas
Global 202014.067,7 Mtpe 29%Oil 5%Other renewable energies 24%Natural gas Source: AIE and Repsol Research Unit 26%Carbon 11%Biomass 5%Nuclear
Global 205017.764,3 Mtpe 27%Oil 24%Natural gas 16%Carbon 13%Biomass 5%Nuclear 15%Other renewable energies Source: AIE and Repsol Research Unit

Advantages and disadvantages of natural gas

If we now discuss the main benefits of using natural gas today, the most significant is the lower carbon footprint it leaves in its emission of greenhouse gases into the atmosphere. Promoting the use of natural gas over other fossil fuels would not only be more sustainable, but would also help to rapidly decarbonise many dependent sectors that can find in natural gas a simple and practical way to improve their environmental performance. 

But it should noted that, as a fossil fuel, natural gas also has a number of associated drawbacks. Chief among these is the emission of methane into the atmosphere, as well as sulphur dioxide, carbon dioxide and nitrogen oxides, albeit in smaller quantities. To mitigate these effects, in May 2020, the European Commission established a set of recommendations aimed at achieving reductions in methane emissions throughout the natural gas supply chain in the European Union. These include establishing a robust verification and monitoring reporting system to better detect and quantify emissions, carrying out campaigns to detect and remediate fugitive emissions and implementing new technologies to help encourage reductions. 

Biomethane as a complementary alternative to natural gas

Another aspect of natural gas is that it is from an organic source and is therefore limited in nature. The good news is that the latest technological developments in the energy sector have found a really useful substitute for natural gas in the future: biomethane.

The main component of natural gas is methane, which can also be produced by bacterial fermentation processes of organic matter from, for example, sewage or municipal solid waste. This process results in a renewable energy source with a low carbon footprint that has very similar uses to natural gas and can be used in other renewable processes, such as hydrogen production. It is also worth highlighting biogas as another of the alternatives with the greatest potential in this field, which is also obtained from biodegradable organic matter.

Natural gas is currently undergoing a period of global uncertainty

Although natural gas seems to be on its way to becoming a major player in the renewal of the energy system, in recent months the war in Ukraine has been a turning point for this market, increasing its level of instability. This situation is due to supply cuts from Russia, one of the main exporters of gas at international level, as a result of the sanctions imposed on it at the EU level and the possibility in the future that the country will completely halt the sale of this product to the European Union. 

To deal with this complicated situation, not only at the economic level due to the increase in prices but also at the social level due to the possibility of shortages in the coming winter, the European Commission has launched an ambitious plan called REPowerEU aimed at ending dependence on Russian fossil fuels. 

Among the main measures agreed on in the plan are:

  • Encouraging savings in gas consumption in households and industry. According to the indications recently established in the European Commission's Emergency Plan, countries are asked to voluntarily reduce the use of this fuel by 15% from August until the end of March 2023. This reduction could become mandatory if the situation with Russia does not improve.  
  • Meeting stockpile targets. EU states must have their gas reserves at 80% capacity by 1 November 2022. In addition, solidarity mechanisms are established between them to share it, due to the inequalities of dependence that exist.   
  • A commitment to producing other types of cleaner energies such as hydrogen and biomethane. The objective with hydrogen is to achieve 20 MT by 2030—10 MT of domestic production and 10 MT through imports—while for biomethane the goal is to achieve 35 BCM by 2030 and thus multiply current production by a factor of twelve.
  •  Diversify energy supplies. Either by sourcing gas from markets other than Russia, by making common purchases at the European level and increasing the relevance of liquefied natural gas, which is more flexible when it comes to transporting it. 

These are very powerful measures with which Europe seeks to become even more sovereign in using and consuming energy, while continuing to make progress on the sustainability objectives that are so important for combating climate change. They also represent a very clear commitment to natural gas, which, despite going through a complex period, is a safe asset that can be of great use on the road to energy transition and whose flow must be ensured in the future.

Related content

The path towards an environmentally sustainable aviation

Transport is responsible for up to 28.5% of CO2 emissions in the European Union. In this segment, aviation contributes to 13% of those emissions.

To meet the decarbonisation targets for this sector and align with the Paris Agreement, it is crucial to understand the pillars of decarbonization and to quantify the reduction of emission throughout the lifecycle of aircrafts. Energy efficiency and fuels with low or zero carbon footprint are fundamental, whether for general, commercial or military aviation.

The Energy Transition Chair of the Repsol Foundation at the Polytechnic University of Madrid is organising this webinar together with Ryanair and IATA to discuss these challenges and explore innovative solutions that can accelerate the decarbonisation of air transport, contributing to a more sustainable aviation.

Event - 29 Oct 2024
  • Energy Transition
  • Regulating energy transition
  • Challenges posed by climate change and energy transition
Green New Deal o Nuevo Pacto Verde es la apuesta de la Unión Europea para reducir emisiones, que requiere pasar del compromiso a resultados realmente efectivos
Green Real Deal

 

The issue of climate change is gaining prominence on a daily basis, reflecting society’s growing concern and demand to mitigate the already evident consequences of human-induced global warming. 

Concerning this demand, one proposal that has been forging its way is that of a “Green New Deal”. It would be a matter of making a virtue out of necessity, making the most of the opportunity created by the challenge of an accelerated reduction of greenhouse gas emissions to undertake a radical socio-economic transformation that would, at the same time, bring about greater social justice. The idea, inspired by president Franklin D. Roosevelt’s “New Deal” to combat, between 1933 and 1938, the effects of the Great Depression in the United States, has been welcomed with interest.

The “Green New Deal” concept is attractive, both intellectual and political. However, we cannot stop at relatively brilliant proposals. What is really important now is to move from theoretical and generic formulations to immediate, specific, and effective actions. I.e., from the virtual land of good intentions to the reality of best practices. It is about going beyond the commitment, to concentrate on optimising results. A step that requires sifting utopias through the sieve of the limitations imposed by scientific, technical, economic, and social realities. 

To underline this pragmatic approach, Ernest J. Moniz, a nuclear physicist who was Secretary of Energy with Barack Obama between 2013 and 2017, resorts to irony and a play on words, to instead of “Green New Deal” propose a “Green Real Deal”. This emphasis on effectiveness is very pertinent if, for example, we take into account that the commitments achieved in the framework of the much-vaunted Paris Agreement are, in reality, totally insufficient to prevent a rise of more than 2ºC in the average temperature of the planet.

For Moniz, the green deal should be articulated around: 

1) rigorous analyses based on science and technology,
2) open and flexible approaches that favour optionality, thus enabling the formation of the broadest possible coalitions,
3) inclusive attitudes that ensure the participation of all economic sectors, particularly those that are most difficult to decarbonise, such as transport, industry, and agriculture,
4) a special sensitivity to different demographic and territorial realities, since low-carbon solutions inevitably depend on the location and characteristics of each human group, and
5) a firm commitment to social equity and job creation, ensuring that the energy transition does not lead to job destruction or a loss of job quality.

And what would need to be done to achieve a real effective mitigation of climate change? Obviously, immediately, each territory and community should choose, amongst the diverse options potentially available, the most efficient (those that give better results) and ensure that they operate efficiently (they work well) both technically and economically. In the longer term, Moniz believes that the central component is innovation, both in technology, business models, and policy, with the understanding that technological innovation would be the enabler of the others. Ultimately, without new disruptive, large-scale deployable, and affordable technological breakthroughs, the world will not reach the climate goal of achieving a carbon-neutral balance. 

Such technologies should allow the direct capture of CO2 from the air, the reuse of said compound on a commercial scale within a circular economy scheme, the biological and geological storage of billions of tons of CO2, the storage of electricity at affordable prices for periods of time ranging from days to seasons of the year, the production of energy from advanced nuclear fission and fusion, the advent of the hydrogen economy, the full integration of information technologies and energy systems, the development of low-carbon fuels, and so on. 

Article published in El Periódico.

 

Opinion article - 02/09/2023
  • Financing energy transition
  • Regulating energy transition
  • Challenges posed by climate change and energy transition
  • Strategy
  • New technologies
El impulso a la economía circular implica a toda la sociedad
Energy Security in the EU: Preparing for an EU without Russian Energy

Points of View

Laura Rejon Perez, Head of Division, Wholesales and Gas Trading, Repsol

 

Luis Ignacio Parada, Energy Policy & Global Regulation Director, Enagás

  • There is no certainty of natural gas flows for next winter. Russian gas flows to Europe have been declining while Norway is committed to maintaining high export levels with maximum flows. Algerian exports are below 2021 levels, but this is due to a reduction in flows to Spain which have been partly compensated through flows to Italy.
  • REPowerEU includes a target of importing 50 bcm of additional LNG.
  • However, internal EU bottlenecks prevent full usage of existing regasification capacities. Most of the spare LNG capacity in the EU is 100% booked, with the exception of Spain which has around 38% of the EU’s total regasification capacity. Because of a lack of export infrastructure, this capacity cannot directly be used for the EU in the short term; nevertheless, Spain can make a contribution as a logistical hub for LNG.
  • The new storage regulation requires a legal obligation to fill gas storage to 80% of its capacity by 1 November 2022, rising to 90% for subsequent years until December 2025.
  • Storage levels in the EU are currently at around 60% (at the time of the webinar, early July 2022). The main challenges are the (uncertainty on the) availability of gas and whether Russia will continue to ship gas through Nord Stream 1.
  • In terms of hydrogen, a target of 20 million tonnes of renewable hydrogen has been set by 2030; half of that amount is foreseen in the shape of imports. EU production will be facilitated by the following measures:
    • Delegated Acts on the definition and production of renewable hydrogen
    • Hydrogen quality standard
    • Important Projects of Common European Interest (IPCEI) assessment + funding
    • Dedicated workstream in the EU Energy Platform
    • Steps towards dedicated hydrogen infrastructure, including three corridors connecting outside the EU
  • However, other recommended measures include:
    • Adding infrastructure targets to existing supply or consumption targets
    • Permitting: Member States should establish temporary frameworks to handle hydrogen infrastructures until the package is approved and transposed
    • Promote independent hydrogen network operators through ownership unbundling
    • Facilitate market uptake by ensuring unbundling models are interpreted with proportionality

 

Giulia Laura Cancian, Secretary General, European Biogas Association

  • The crisis response that is REPowerEU represents a positive historic shift for biomethane, with a target of producing 35 bcm by 2030.
  • Reaching this target entails multiplying existing production (3 bcm) by 12. This can be done using only sustainable feedstocks such as industrial wastewater, livestock manure, food waste, agricultural residues, and sequential cropping. The biomethane could substitute 20% of Russian gas imports, equivalent to 10-14% of the EU gas demand foreseen in 2030.
  • Biomethane production grew by 25% in 2020 (most of the growth in the biogas sector was in biomethane). In order to reach the 35 bcm target, there needs to be a flat growth rate of 28% each year until 2030.
  • In the biomethane action plan, there are five areas of measures:
    1. Promoting production, use of and injection
    2. Providing incentives for biogas upgrading into biomethane
    3. Promoting adaptation of existing gas networks and exploring regional potential
    4. Addressing research and development gaps
    5. Improving access to finance
  • There is a very positive political recognition for biogases at the EU level with a call for Member States to politically prioritise through their own national biomethane strategies.
  • The plan offers a bottom-up approach to infrastructure planning for biomethane integration
  • Nevertheless, the 35 bcm target is not incorporated in the amendment of the Renewable Energy Directive, which means that the target remains indicative.
  • Other concerns include the specific guidelines on the final utilization of biomethane, which offer limited flexibility for the different end-use sectors such as the transport, where the target for advanced biofuels has remained unchanged.

 

Topics of debate

During the discussion round, Laura Rejon Perez discussed the worst and best case scenarios for natural gas in Europe next winter. She mentioned the worst-case scenario would be a lack of sufficient gas to meet demand, which would require energy rationing, while the best-case scenario would be to not suffer any further import disruptions, experience a mild winter, see Nord Stream 1 resuming throughflow at higher levels, and successfully start operation of FRSUs.

Addressing the policies that need to be in place for a cost-efficient transition to a decarbonized gas future, Luis Ignacio Parada emphasized the importance of targets for both production and infrastructure, and addressed the definition of renewable hydrogen and the role of unbundling, particularly for hydrogen.

On the sustainability of biomethane and possible risks to food security, Giulia Lauran Cancian explained that existing regulation calls for 70% of greenhouse gas emission savings in biogas and biomethane used for electricity, heating and cooling production, and 80% for installations starting operation from 2026; these provisions ensure that large-scale, monoculture energy crops will not be an option for the generation of biomethane. Moreover, new biomethane capacity installed from 2018 has been using a decreasing and barely visible share of energy crops.

Further talking points included the floating storage regasification units expected to be operative in Europe in the coming years; the impact of the inclusion of natural gas in the EU taxonomy, especially in the importation of LNG to Europe; the synergies between different gases and adapting them into existing infrastructure; as well as demand-related measures including energy efficiency policies and potential rationing.

 

Next steps

Since the webinar took place, Gazprom resumed its gas deliveries via Nord Stream 1 on 21 July 2022, albeit at reduced flows (at 40%), and further reduced them to 20% on 26 July 2022, citing technical problems. As a response to what the Commission has dubbed ‘Putin’s Energy Blackmail’, the EU body has announced a European Gas Demand Reduction Plan, to diminish gas use in the EU by 15% between 1 August 2022 and 31 March 2023. Other measures include accelerating work on supply diversification, including joint purchasing of gas to strengthen the EU's possibility of sourcing alternative gas deliveries.

The new regulation was initially designed to include a voluntary gas demand reduction, but with a clause giving the Commission the ability to impose a 15% reduction in gas demand (by declaring, after consulting Member States, a ‘Union Alert' on security of supply, which would trigger mandatory demand reductions). After pushback from several Member States, the system was modified in two main ways. First, the voluntary agreement would become mandatory through a Council implementing decision, upon either a proposal by the Commission to trigger a ‘Union alert’ if supplies reach crisis levels, or if five or more member states request the Commission to do so. Second, the Council has specified several exemptions to the mandatory reduction target, including: member states not connected to the EU’s gas pipelines such as Malta, Ireland and Cyprus, as well as Baltic states that are heavily reliant on gas for power generation and whose electricity grids are not synchronized with the European’s electricity system. Further derogations include countries that surpass the gas storage filling target of 80%; countries that require gas as feedstock to sustain their critical industries; or countries whose gas consumption has increased by at least 8% in the past year. 

Since the regulation is an exceptional measure, it will apply for one year and will be reviewed by May 2023. The next informal meeting of energy ministers will take place on 11-12 October; discussions are  likely to include discussions on the implementation of this regulation. 

articulo_tecnico - 02/09/2023
  • Impact on society
  • Regulating energy transition
  • Challenges posed by climate change and energy transition
  • Decarbonization
  • Strategy