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CEO of energy technology firm Baker Hughes described what he sees as key points related to the energy transition amid growing concern over rising gas prices and the ripple effects this could have. In the coming months.
In an interview with TBEN’s Dan Murphy at the Gastech conference in Dubai, United Arab Emirates earlier this week, Lorenzo Simonelli was asked whether the gas price spike was likely to be transient or s ‘he expected broader implications for consumers, markets and the economy in general.
“I think a lot of people see what is happening in Europe and it highlights the important debate around the energy transition, and the importance we have around gas as well,” he said.
It was still early to see if prices would stay high or if this rise was transient, he said.
European benchmark gas prices have jumped more than 250% since the start of the year, Reuters reported this week.
The reasons for the peak are varied. The influential, but generally conservative, International Energy Agency said on Tuesday that the spike in European gas prices was “sparked by a combination of a strong recovery in demand and tighter-than-expected supply,” as well as several factors related to weather conditions “.
“These include a particularly cold and long heating season in Europe last winter and lower than normal wind energy availability in recent weeks,” he said.
IEA Executive Director Fatih Birol said that since the reasons for the price hikes were multiple, it would be “inaccurate and misleading to dismiss the blame for the clean energy transition” .
Birol’s statement would appear to contrast the views expressed by figures such as OPEC Secretary General Mohammed Barkindo. Barkindo told TBEN on Tuesday that soaring gas prices were the cost of trying to switch to renewable energy sources.
“I talked about a new premium that is emerging in the energy markets and that I call the transition premium,” Barkindo said.
The effect of the rise in the price of gas is already being felt on the ground. In the UK, for example, this caused the bankruptcy of a number of small energy suppliers.
“We need energy security,” said Simonelli of Baker Hughes. “And look, there is a lot of gas in the world, there is a lot of energy available,” he added. “It’s about bringing it to the market.
On energy transition – a term referring to a shift from sources based on fossil fuels to sources such as solar and wind power – Simonelli sought to highlight a number of issues he considered important.
“We think there are three hard truths,” he said. “First of all, we have to work together, accelerate the movement towards decarbonisation and also eliminate emissions.”
“Second, hydrocarbons are here to stay… and natural gas, in fact, is key. And third, we need to do it together, collaborate and embrace the new technologies available. “
The burning of fossil fuels, such as oil and gas, is the main driver of the climate emergency. And despite policymakers and business leaders repeatedly touting their commitment to net zero strategies, global dependence on fossil fuels is expected to worsen further in the coming decades.
None of the world’s major economies are currently on track to contain global warming to the Paris Agreement target of 1.5 degrees Celsius, according to a study released by Carbon Action Tracker earlier this month , while separate research shows that the vast majority of the world’s known fossil fuel reserves must be kept in the ground to have any hope of preventing the worst effects of climate change.
The role of natural gas
The current crisis surrounding the price of gas has reinforced its continued importance, even as large economies such as the UK, EU and US plan to move away from fossil fuels in the years to come.
Indeed, in its statement released Tuesday, the IEA said gas remains “an important tool in balancing electricity markets in many regions today.”
“As clean energy transitions move towards net zero emissions, global demand for gas will begin to decline, but it will remain an important component of electrical security,” added the Paris-based organization.
In his interview with TBEN, Simonelli was asked about the role gas would play in the race to net zero. “You just have to look at Europe and the United States in terms of how they have managed over the past decades to actually reduce their CO2 emissions,” he said.
“You’ve seen a shift from coal to natural gas and it’s going to continue if you look at it from an emissions profile,” he said. “So you can reduce the footprint of natural gas from an emissions perspective. It is already one of the most efficient fuels and we believe it is here to stay.
– TBEN’s Natasha Turak contributed to this report