Thursday, 21 November 2024 06:16

The world will need even more energy in the future, GECF Secretary General Mohamed Hamel

Caspian Energy (CE): Your Excellency, you visited Azerbaijan for the second time last June and delivered an important speech at the Baku Energy Week. How important is Azerbaijan for your organisation, the Gas Exporting Countries Forum? 

H.E. Eng. Mohamed Hamel, Secretary General of the GECF: Indeed, I recently had the pleasure of returning to the historic city of Baku, the birthplace of the oil industry.  Azerbaijan is a key member of the Gas Exporting Countries Forum (GECF), an intergovernmental organization comprising 20 countries that collectively represent approximately 70% of the world’s gas reserves and 40% of marketed production.  

Azerbaijan has long been a pivotal player in the global energy sector, beginning with oil, progressing to natural gas, and now actively diversifying into renewable energy. Through its ba­lanced and smart energy strategy, leveraging the synergy between natural gas and renewables, it significantly contributes to global energy security and sustainability.  

Furthermore, Azerbaijan’s selection as the host of COP29 is a testament to its growing leadership in the transition to a more sustainable energy future, and the international community’s trust in its ability to organize large-scale global events. During my visit in June, I had the distinct pleasure of engaging in fruitful discussions with the Minister of Energy, Parviz Shahbazov, and the Minister of Ecology and Natural Resources and COP29 President Designate, Mukhtar Babayev. I conveyed the full support of the GECF for the success of COP29. We will actively participate in the event, notably through a dedica­ted pavilion, to highlight the essential role of natural gas in providing affor­dable, reliable, and sustainable energy, emphasizing its crucial role in orderly, equitable, and economically viable ener­gy transitions. 

 

CE: There is a debate about the future of fossil fuels, including natural gas. From your perspective, what are the major challenges and opportunities facing natural gas markets today and in the medium-to long-term?

Mohamed Hamel: The recent global health crisis and geopolitical tensions have underscored that reliable energy is the lifeblood of modern economies, pushing energy security to the forefront of policy decision-making. This highlights the critical need to balance energy security, affordability, and sustainability. 

Moreover, a recent United Nations report raised alarm over significant implementation gaps in the 2030 Sustainable Development Agenda. Now at the halfway mark, the vast majority of the 140 targets set in 2015 are off track. The promises of the 17 Sustainable Development Goals, particularly in Africa, remain largely unmet, notably in terms of eradicating poverty and hunger, ensuring universal access to energy, providing clean water and sanitation, and mitigating climate change. In today’s challenging environment - marked by high inflation and interest rates, and pervasive debt - these challenges become even more daunting. 

The scale of the global energy system is immense, delivering nearly 300 million barrels of oil equivalent daily from production sites to end consumers. Hydrocarbons still account for 80% of the energy mix, and coal consumption reached record levels in 2022 and 2023. Additionally, 2.3 billion people still lack access to clean fuels for cooking, and just above 700 million lack access to electricity. More than one-third of glo­bal electricity is generated from coal.  

This is today’s reality. And the world will need even more energy in the future.  The GECF projects a 20% increase in energy consumption over the next three decades, primarily in developing countries. This growth is driven by an additional 1.7 billion people by 2050, the doubling of the global economy’s size, and the universal quest for higher living standards. 

The pressing question, therefore, is: how can we eradicate energy poverty, meet the world’s growing energy needs, and simultaneously reduce indoor pollution, improve urban air quality, and lower greenhouse gas emissions? 

There is no simple, universal answer to this complex challenge - no one-sizefits-all solution. At the GECF, we believe that addressing the energy trilemma and achieving the UN’s 2030 Development Agenda, as well as the Paris Agreement’s long-term goals, requires leveraging all available energy sources and technologies. Energy pathways must be tailored to national circumstances, capabilities, and priorities. 

Natural gas, the cleanest of hydrocarbons, is a key part of the solution, alongside renewables. It serves as a sustainable alternative to traditional cooking and heating fuels, reducing indoor pollution and deforestation. Transitioning from coal to natural gas enhances urban air quality and dramatically lowers greenhouse gas emissions. Additionally, natural gas provides the stabi­lity and backup needed for power grids based on intermittent renewables, while renewables, in turn, help reduce the carbon footprint of gas operations. Moreover, as a key feedstock in fertilizer production, natural gas supports food security and contributes to eradicating hunger. 

The GECF projects natural gas demand to increase by 34% by 2050, and its share in the global energy mix to rise from 23% to 26%. It is the second fas­test-growing energy, after renewables. These figures could be even higher if the substantial electricity demand from expanding artificial intelligence data centers is fully considered. 

LNG supply, which is expected to increase by nearly 40% by 2030 and approximately double by 2050, will help natural gas markets become more global, flexible, and competitive. In the short term, natural gas markets are likely to stabilize, with prices returning to pre-COVID levels, although volatility may remain high over the next two years due to a relatively tight market. The medium term, particularly between 2026 and 2029, will witness a substantial increase in LNG liquefa­ction capacity, with around 220 Mtpa currently under construction. 

This may exert downward pressure on gas prices, posing challenges for the gas industry and exporting countries. However, lower prices will support demand expansion and pave the way for tighter market conditions after 2030. 

The cumulative investment required in upstream and midstream sectors to meet the growing gas demand is projected to exceed US$9 trillion over the next three decades. Ensuring security of supply hinges on timely and adequate investment. However, calls to halt investment in natural gas threaten future security of supply and economic growth.  

Equally important is security of demand. Natural gas projects are capital intensive, with long lead times and extended payback periods. Stable and predictable demand over the long term enables producers to plan their operations and investments effectively. This security also depends on continued access to markets and financing, as well as economic, regulatory, and contractual stability. 

 

CE: How does the GECF view the calls to reduce the carbon footprint of na­tural gas, and what actions is the organization taking in this crucial area?

Mohamed Hamel: Making natural gas more environmentally friendly is a critical priority for the gas industry. This entails improving energy efficiency across the natural gas value chain, eli­minating routine gas flaring, and drastically reducing methane emissions. These steps are necessary for natural gas to remain a leading energy source in the future. In this regard, GECF Member Countries are implementing ambitious plans, leveraging a combination of incentivizing laws, stringent regulations, and significant investments in cleaner technologies. 

The industry also faces the pressing challenge of scaling up critical technologies such as Carbon Capture, Utilization, and Storage (CCUS). Deplo­ying CCUS is essential for achieving the goals set out in the Paris Agreement. Our analysis indicates that between 3 to 7.5 gigatonnes of CCUS capacity will be required by 2050. Recognizing this need, several GECF Member Countries, such as Qatar and the UAE, are making substantial investments in CCUS pro­jects, positioning themselves as leaders in this transformative technology. 

CCUS is also a cornerstone for the development of blue hydrogen, the most costeffective means to decarbonize industrial processes that require high temperatures. CCUS is also essential for the development of the nascent but highly promising technology of direct air capture. 

International collaboration and knowledge sharing are crucial in acce­lerating the development and deployment of these cleaner technologies. Partnerships between governments, industry, and research institutions can drive innovation and facilitate the exchange of best practices. In this regard, the GECF has recently established the Gas Research Institute based in Algiers. 

Public and stakeholder engagement is equally important, as it helps build support for cleaner natural gas initiatives. Transparency in reporting emissions reductions and communicating the benefits of cleaner natural gas for local communities and the environment can strengthen these efforts. 

Finally, financial mechanisms and incentives, such as carbon pricing, green bonds, and other innovative funding solutions, could support the transition to cleaner natural gas. Integrating circular economy approaches, such as recycling CO2 from CCUS processes or utilizing byproducts from natural gas processing, can further enhance the environmental performance of natural gas. 

The upcoming discussions at COP29 in Baku could be instrumental in facilitating the development, deployment and financing of these technologies. 

In today’s dynamic energy landscape, robust dialogue between natural gas producers and consumers is crucial. Strong producer-consumer dialogue builds trust, reduces geopolitical tensions, safeguards natural gas critical infrastructure, and contributes to a more resilient, secure and balanced global energy market.  The Algiers Declaration, outcome of 7th GECF Summit of Heads of State and Government, reaffirmed Member Country support for robust and meaningful dialogue among natural gas producers, consumers, and other relevant stakeholders, and called on the GECF to become a leading platform for dialogue and cooperation on natural gas matters.

 

CE: You have mentioned in your speech in Baku that natural gas and renewables are partners and you have also underlined the importance of investment?  Could you elaborate more on this?  

Mohamed Hamel: Natural gas and renewables are essential partners in ensuring energy security, affordability, and sustainability. As the world increasingly relies on renewable sources like wind and solar, the variability of these energy sources can challenge the consistency and reliability of power supply. Natural gas-fired power plants, with their ability to ramp up and down quickly, are effective in balancing the grid when renewable generation fluctuates. This partnership not only enhances grid reliability but also supports decarbonization efforts. Since natural gas emits significantly fewer carbon emissions than coal, its use alongside renewables helps reduce overall greenhouse gas emissions while still meeting energy demand.  

While battery storage technology is advancing, it is not yet at the scale or cost efficiency needed to store large amounts of energy for extended periods. This is where natural gas plays a vital role, acting as a reliable backup when renewable generation is insufficient. 

Additionally, natural gas provides crucial support to hydropower systems during droughts and low water levels. In regions heavily reliant on hydropo­wer, such as parts of Latin America and certain European countries, natural gas can compensate for hydropower shortfalls, preventing blackouts and maintaining a steady supply of electricity. 

Conversely, integrating renewable energy into natural gas supply operations further reduces the industry’s carbon footprint. This approach not only supports decarbonization goals but also offers potential cost savings and additional revenues by cutting fuel use in operations. A prime example is the development of the Shafag solar power plant in Azerbaijan’s Jabrayil region, which will play a key role in the decarbonization of the Sangachal Terminal. 

With regard to investment, it is indeed crucial. Ensuring security of supply hin­ges on timely and adequate investment. The cumulative investment required in upstream and midstream sectors to meet growing gas demand is projected to exceed US$9 trillion over the next three decades. This investment is essential to offset the natural decline of fields, which is 4% to 5% annually, and to sa­tisfy increasing demand. Calls to halt investment in natural gas projects threa­ten future supply security and could lead to extreme price volatility, harming both producers and consumers. 

Equally important is security of demand. Natural gas projects are capital intensive, with long lead times and extended payback periods. A stable and predictable demand over the long term enables producers to plan their operations and investments effectively. This security depends on continued access to markets and financing, as well as economic, regulatory, and contractual stability. In conclusion, the world will need natural gas for decades to come. It is part of the solution. This has been recognized by the international community in the outcome of the first Global Stock Stake at COP28, namely that transitional fuels can play a role in facilitating the energy transitions while ensuring energy security.

 

CE: What are your expectations for COP29, which will be held in Baku?

Mohamed Hamel: First and foremost, I would like to extend my heartfelt congratulations to Azerbaijan on being selected as the host of COP29. This is a significant achievement, and we fully support the successful organization and inclusive outcomes of this pivotal conference. Hosting COP29 in Baku offers a unique opportunity to highlight the Caspian region’s vital role in the global energy transitions and to demonstrate how traditional energy producers can lead in adopting sustainable practices. 

We are particularly proud that, for the third successive year, a UN Climate Conference is being held in a GECF Member Country: Egypt, UAE, and now Azerbaijan.  

I have high expectations for COP29 as an inclusive platform for advancing global climate discussions. The Gas Exporting Countries Forum (GECF) will be actively engaged throughout the Conference, including through a dedicated GECF pavilion. This pavilion will serve as a hub for discussions on the essential role of natural gas in energy transitions, showcasing our commitment to sustainability and innovation in the sector. 

Under the able leadership of H.E. Mukhtar Babayev, I am confident that the most fundamental and pressing issues will be addressed at COP29, in an inclusive process and with inclusive outcomes.  

First, it is essential to reaffirm the UNFCCC principles of equity, common but differentiated responsibilities and respective capabilities, and that poverty eradication and socio-economic development are the overriding priorities for deve­loping country Parties, as well as the Paris Agreement fundamental provision that national contributions are nationally determined, in the light of  different national circumstances. 

Second, a critical focus of COP29 should be on establi­shing a New Collective Quantified Goal on climate finance. The adequate and predictable provision of financial resources by developed countries is vital for supporting both mitigation and adaptation actions in developing countries. 

Third, I look forward to advancing the operationalization of Article 6 of the Paris Agreement. Effective implementation of Article 6 can enhance global climate ambition by enabling countries to meet their targets more cost-effectively, while also driving investments in low-carbon technologies, including cleaner fossil fuel technologies, and in coal-to-gas switching. 

Fourth, I expect strong emphasis on enhancing international cooperation to accelerate the deployment of cleaner energy technologies, such as Carbon Capture, Utilization, and Storage (CCUS) and hydrogen production. These technologies are crucial for achieving the Paris Agreement’s goals, and I hope to see concrete steps to support their widespread implementation. In this context, greater focus on the means of technology transfer and capacity building is essential. 

Fifth, I anticipate significant opposition to carbon border taxes. These measures are viewed as coercive trade barriers and disguised protectionism, undermining the objective of equitable and just transitions. They conflict with the principle of common but differentiated responsibilities and res­pective capabilities, disregard the nationally determined nature of mitigation and adaptation contributions under the Paris Agreement, and risk exacerbating global inequalities by placing disproportionate burdens on developing countries, further hindering their sustainable development efforts.  

Finally, COP29 will be a pivotal moment to reinforce the importance of balancing energy security with sustainability. To this end, the role of natural gas in supporting sustai­nable development and climate objectives, in partnership with renewables, could be further supported. Azerbaijan’s balanced and smart energy transition strategy provides an exemplary model in this regard. I wish Azerbaijan every success in hosting COP29 and in contributing to a more sustainable and secure energy future. You have the fullest support of the GECF.  

 

Thank you for the interview.

 

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