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International Gas
    October 2020

Industry expected
to rebound in 2021
Industry expected to rebound In 2021 - InternatIonal Gas October 2020 - International Systems and ...
Passionate
about Progr
is making dreams come
Industry expected to rebound In 2021 - InternatIonal Gas October 2020 - International Systems and ...
ess
alive
Industry expected to rebound In 2021 - InternatIonal Gas October 2020 - International Systems and ...
Industry expected to rebound In 2021 - InternatIonal Gas October 2020 - International Systems and ...
International Gas
October 2020
Published by International Systems and Communications Limited (ISC)
in conjunction with the International Gas Union (IGU).
Copyright © 2020. The entire content of this publication is protected by copyright, full details
of which are available from the publisher. All rights reserved. No part of this publication may
be reproduced, stored in retrieval systems or transmitted in any form or by any means –
electronic, mechanical, photocopying, recording or otherwise – without the prior permission
of the copyright owner.

International Systems and                                       International Gas Union
Communications Limited                                          PO Box 3
140 Tachbrook Street                                            Plaça del Gas, 1
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                                                                Website: www.igu.org
Industry expected to rebound In 2021 - InternatIonal Gas October 2020 - International Systems and ...
Vision and Mission
     The International Gas Union (IGU) is a worldwide, non-      IGU works to improve the competitiveness
     profit organisation promoting the progress of the gas        of gas in the world energy markets by pro­moting
     industry. Through its many member countries and              transparency, public acceptance efforts and the
     corporations representing over 95% of the global gas         removal of supply and market access barriers.
     market, IGU covers all aspects of the gas industry.         IGU seeks to collaborate with governmental
                                                                  agencies and multilateral organisations to
     Vision                                                       demonstrate the economic, social and
     As the global voice of gas, IGU seeks to improve the         environmental benefits of gas in the global
     quality of life by advancing gas as a key contributor        energy mix.
     to a sustainable energy future.                             IGU supports and facilitates the development
                                                                  of new technologies and best practices, while
     Mission                                                      emphasising sound environmental performance,
      IGU is the key and credible advocate of political,         safety, reliability and efficiency across the entire
         technical and economic progress of the global gas        value chain.
         industry, directly and through its members and in       IGU maximises the value of its services to
         collaboration with other multilateral organisations.     members and other stakeholders.

4 Visi o n a n d M i s s i o n
Industry expected to rebound In 2021 - InternatIonal Gas October 2020 - International Systems and ...
HOW CAN WE PROVIDE
ACCESS TO ENERGY
WHILE MINIMISING
NEGATIVE IMPACTS ON
THE ENVIRONMENT?

           Natural gas – providing more and cleaner energy
           www.shell.com/roleofnaturalgas
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Developing biogas
                                                                                                 in our towns
                                                                                        to fuel the agricultural sector
ENGIE : SA AU CAPITAL DE 2 435 285 011 € - RCS NANTERRE 542 107 651. © Getty Images.

                                                                                          in our rural communities.
                                                                                                      ENGIE, solutions to support
                                                                                                      your zero-carbon transition.
                                                                                          Alongside our partners, we are investing €800 million in green gas
                                                                                             between now and 2022 in France. We are banking on biogas,
                                                                                       in particular by working with farmers whose waste products we recycle,
                                                                                                   thus contributing to the agro-ecological transition.
                                                                                                         For more information, visit engie.com
Industry expected to rebound In 2021 - InternatIonal Gas October 2020 - International Systems and ...
Contents
OCTOBER 2020

  Introduction                                                                          Why LNG is the best deep-sea marine fuel
                                                                                        option today                                                         44
Vision and Mission                                                             4
                                                                                        By Peter Keller
Message from the President and
the Secretary General                                                          8
                                                                                           News                                                              53
Update on IGU’s current work programme                                        12
By Jeongwook Khang                                                                      IGU awards at WGC 2021                                               56
                                                                                        Reports from the Regional Coordinators                               60
                                                                                        Members’ corner                                                      64
  Features                                                                   17
                                                                                        Presenting IGU’s new members                                         68
The mixed impacts of coronavirus on
                                                                                        Activities of IGU                                                    72
the Latin American gas markets                                                20
By Mauro Chavez and Rodrigo Rosas                                                       Global Gas Report predicts growth will resume                        76

Cost-effective and clean ways of producing                                              IGU publishes latest wholesale gas price survey                      78
hydrogen from natural gas                                                     26        Gas technology and innovation for a
By Alexander Ishkov, Konstantin Romanov,                                                sustainable future                                                   80
Roman Teterevlev and Maximilian Kuhn
The roll-out of hydrogen in Korea                                             32
                                                                                        IGU Organisation                                                     84
By Yoon Namgoong
                                                                                        Members of IGU                                                       86
Smart gas metering: A Portuguese project                                      38
By Nuno Nascimento and Mariana Paiva                                                    Events and Acknowledgements                                          88

The opinions and views expressed by the authors in this magazine are not necessarily those of IGU, its members or the publisher. While every care has been
taken in the preparation of this magazine, they are not responsible for the authors’ opinions or for any inaccuracies in the articles.

                                                                                                                                                                  7
Industry expected to rebound In 2021 - InternatIonal Gas October 2020 - International Systems and ...
I NTRODUCT I ON

MESSAGE FROM THE PRESIDENT
AND THE SECRETARY GENERAL
Dear Colleagues,                                                                   ful webinars, since we launched the
Welcome to the final edition of the                                                service this summer, and plan to
IGU print magazine.                                                                continue with this new feature. While
   It is hard to believe, but we are                                               some of the webinars will be com­
now well into year three of the Korean                                             pletely open to the public, others will
Presidency, and this year has been                                                 be restricted to IGU members only.
one to put us all to a test.                                                         On April 27, we released the 2020
   We are so proud to represent an                                                 World LNG Report, our flagship annual
industry that showed commitment                                                    publication, providing key insights into
and compassion in navigating this                                                  LNG industry developments during
challenging time. We are proud of                                                  2019 and a glimpse into the future of
the people that continued to not                                                   key developments and trends in the
only reliably deliver essential energy                                             world of LNG.
to markets, but also support their                                                   In June, we released the first IGU
communities and frontline workers.                                                 digital magazine, Global Voice of Gas
Our hats are off to all of you!                                                    (GVG). GVG will replace the physical
   While much progress has been                                                    magazine, and it will set a new
made in coming out of the Covid-19                                                 standard in communication for the
pandemic health crisis, and the signs                                              natural gas community worldwide.
of economic recovery may be emerg­                                                 Produced in collaboration with
                                         Joo-Myung (Joe) Kang (right) and
ing, there is still some uncertainty     Luis Bertrán Rafecas.                     Natural Gas World, GVG will be a
ahead, and we continue to operate                                                  quarterly digital magazine bringing
in an adaptive environment.              in the key global energy discussions.     new insights and analysis to the global
   Here at IGU, the team has also been   We have been learning and adapting        gas community.
working hard to actively respond to      to the new environment to make sure         On July 2, 2020, we released the
this new environment and focus on        that we are there for the industry        Wholesale Gas Price Survey – 2020
delivering value to our members.         effectively and timely.                   Edition, another valued flagship report.
We have redoubled our digital efforts,                                             The survey is the 12th in a series that
and despite the travel restrictions,     Key developments                          began in 2005.
see great engagement from the IGU        These are some of the highlights from       Also in July, we published, in
membership taking advantage of the       IGU activities, since our last update.    collaboration with the Boston
digital connectivity and participating                                             Consulting Group, and funding
in our new webinar service. We have      Reports and publications                  support from BP and Snam, a new
successfully launched our flagship       IGU has launched a new webinar series.    key report Gas Technology and
reports and continued participating      We have already delivered five success­   Innovation for a Sustainable Future

8 Message from the President and the Secretary General
I NTRODUCT I ON

that quantifies the contribution that         The election will take place                 Research, development and
gas technologies can make to the           during the virtual Council meeting           innovation (RD&I) play a key role for
success of the global energy transition,   on November 18-19, 2020. For more            the gas industry and the challenges
help-ing to build sustainable cities       information about the election and           and the opportunities that RD&I
and communities and to provide             voting procedures, please contact            can address are critical to future
access to affordable and clean energy.     the IGU Secretariat.                         growth and development. More
It features robust analysis demon­                                                      broadly, the industry must demon­
strating economic deployment               Pandemic Advisory Group                      strate that gas is the fastest, most
potential across 12 gas technology         The Pandemic Advisory Group was              economical way to a sustainable
categories, which cumulatively can         established to provide advice and            energy future through innovations
help avoid 12 Gigatons of CO2              guidance to the IGU leadership on            in gas technology.
emissions, or a third of all global        how to best cope and navigate                   The IGU Research Conference
energy sector emissions.                   through the challenges brought               serves to facilitate the discussion and
   In early August, together with          about by the global pandemic.                debate around these issues as well as
research company BloombergNEF              The first greatest near-term challenge       to display the technological develop­
(BNEF) and Snam, we released the           was to review the manner in which            ments becoming available to support
annual Global Gas Report 2020. This        the fall Executive Committee and             the industry's future.
year’s edition traditionally reviews       Council meetings were to be held                You will be able to learn more
key global industry developments           virtually, including conducting the          details of these events and much
and major trends, as well as assessing     important 2024-2027 Presidential             more as you read through this
the impact of Covid-19 on the industry     election. The group has also been            magazine edition.
and recovery projections. It also          working on the process and actions              Last but not least, we continue
features a special focus chapter on the    needed in case WGC2021 would be              working very hard on a smooth
prospects for global hydrogen markets      postponed to 2022.                           transition to our Permanent Head­
develop­ment and what needs to                                                          quarters in London by July 2021.
happen on the policy side for these        Future event news                               As always, we encourage your
prospects to materialise.                  We are pleased to announce                   comments and feedback. It is our
   If you haven’t already, grab            together with our co-organisers, the         utmost priority to listen to our mem­
your copies of these reports at:           Gas Technology Institute (GTI) and the       bers’ needs. Please get in touch by
www.igu.org.                               International Institute of Refriger­ation    writing to us at info@igu.org.
                                           (IIR) that the world’s most important           Thank you for your continued
Election for the Presidency                liquefied natural gas conference,            support and active engagement as
of IGU 2024-2027                           LNG2025, will be held in Doha, Qatar.        we work to advance the natural gas
On June 3, 2020, the Executive             We congratulate Qatar and wish them          industry and enhance IGU’s relevance
Committee endorsed Orlando                 success in the preparations!                 in this changing global climate.
Cabrales Segovia from Colombia                We would also like to share that
and Andrea Stegher from Italy, as the      all IGU Charter Members have been            Joo-Myung (Joe) Kang
candidates for the post of IGU             invited to submit an Expression of           IGU President
President 2024-2027 and host of the        Interest (EOI) to host the IGU Research      Luis Bertrán Rafecas
30th World Gas Conference.                 Conference (IGRC) in 2023.                   IGU Secretary General

                                                             Message from the President and the Secretary General 9
We see              And in natural gas,
possibilities in    the smart partner
the sun and wind.   to renewables.
That keeps                        We see
the lights                        possibilities
shining bright.                   everywhere.
                                    From renewable energy and
                                     cleaner-burning natural gas to
                                      advanced fuels and new low carbon
                                       businesses, BP is working to make
                                        energy cleaner and better.

          Natural gas burns 50% cleaner than coal in power generation.
I NTRODUCT I ON

Update on IGU’s current
work programme
IGU’s committees and task forces are continuing their work under
the Korean Presidency. By Jeongwook Khang

IGU’s 2018-2021 work programme is                   issues across the global gas industry       at: Future gas demand in the world
being carried out under the theme                   and cover the full gas value chain.         energy mix; Future gas exploration
“A Sustainable Future – Powered by                  The call for papers was launched on         and development to satisfy demand;
Gas” and the Union’s 11 committees                  May 29 and the response has been            and Digitisation in the E&P of natural
and two of the three task forces are                excellent. There is still time for sub­     gas. It is also organising two T&I
now focusing on preparations for                    missions via www.wgc2021.org as             sessions on: Frontier E&P tech­
the 28th World Gas Conference,                      the closing date is the end of 2020.        nologies for natural gas; and Gas
which will be held in Daegu, Korea,                    Abstracts submitted for each topic       production stimulation and
June 21-25, 2021.                                   will be assessed on a range of criteria     recovery improvement.
   The committees and task forces                   including originality, objectivity and         The R&D and Innovation
(with the exception of Task Force 1)                quality of exposition, while geo­           Committee is responsible for three
are responsible for organising WGC                  graphi­cal diversity will be sought for     II sessions looking at: Decarbon­
2021’s technical programme. There                   each session.                               isation: The role of gas technologies
will be 39 Industry Insight (II) sessions              To give some examples of                 in moving towards a low-carbon
and 26 Technology and Innovation                    the topics, the Exploration and             society; Decentralisation: The role of
(T&I) sessions, which will look at                  Production (E&P) Committee is               gas technologies to realise a resilient,
commercial, strategic and technical                 organising three II sessions looking        robust and smart society; and Game-

Members of the Strategy Committee during their last physical meeting in Tel Aviv in February.

12 Update on IGU’s current work programme
I NTRODUCT I ON

                          IGU committees and task forces chairs and technical sessions at WGC 2021
                          		                                                                                                                       Industry             Technology &
                          		                                                                                                                        Insight              Innovation
                          Exploration and Production                                  Ekaterina Litvinova, Russian Federation                           3                       2
                          Storage                                                     John Heer, USA                                                    4                       2
                          Transmission                                                Patrick Pelle, France                                             3                       3
                          Distribution                                                José Carlos Broisler Oliver, Brazil                               2                       2
                          Utilisation                                                 Roger Serrat, Spain                                               3                       3
                          Sustainability                                              M. Azhar A. Satar, Malaysia                                       4                       3
                          Strategy                                                    Dr Gerald Linke, Germany                                          4                       3
                          Gas Markets                                                 Christina Zhaoyan Liu, China                                      3                       2
                          LNG                                                         Farid Berrahou, Algeria                                           3                       2
                          Marketing and Communications                                Pierre Bartholomeus, The Netherlands                              3                       2
                          R&D and Innovation                                          Dr Hisataka Yakabe, Japan                                         3                       2
                          Task Force 1: Strategic Communications                      Mark McCrory, United Kingdom                                      *                       *
                          and Outreach
                          Task Force 2: Energy for All                                Barbara Jinks, Australia                                          2                        -
                          Task Force 3: Energy Policy                                 Hedayat Omidvar, Iran                                             2                        -

                          Totals		                                                                                                                     39                      26
                          *Task Force 1’s role is to provide support, guidance and strategic direction for the Public Affairs Director and his team and it does not normally contribute to
                          the WGC 2021 roster of papers.

changing LNG technologies. It is also                    emissions and for ensuring the                                         countries normally meet twice a
collaborating with the Transmission                      intro­duction of renewable gases;                                      year with members taking turns to
Committee on two T&I sessions                            Innovations in gas transmission                                        host the gatherings, but the global
looking at the implementation of                         networks: a booster for the flexibility                                pandemic has put a temporary
cutting-edge technologies for:                           of energy markets; and IoT and AI:                                     stop to this. The last physical
Digitisation; and Mixing gases.                          The two allies to optimise risks and                                   meetings were of Task Force 2 in
   For its part, the Transmission                        costs in gas transmission networks.                                    Bonn, Germany, February 10-12,
Committee is responsible for three                           Task Force 2 – Energy for All is                                   and of the Strategy Committee in
II sessions looking at: Advances in                      responsible for two II sessions asking                                 Tel Aviv, Israel, February 26-28.
the reduction of greenhouse gas                          the questions: Who will facilitate and                                 Since then there have been several
(GHG) emissions and in transporting                      fund energy access? Energy access –                                    online meetings.
renew­able gases in transmission                         Where can gas be the solution?                                              For any further information please
systems; Gas transmission networks                           For the Plenaries, Current Debate                                  contact the Deputy Manager of the
to enhance the vitality of energy                        sessions and Luncheon Addresses, the                                   Korea Presidency Team, Ms Seyoung
markets; and Social value creation for                   Coordination Committee working with                                    Ha (syha@wgc2021.kr) or me directly
trans­mission system operators and                       the Presidency has selected the topics                                 (jwkhang@wgc2021.kr).
stakeholders. It is also responsible for                 and is inviting high-level speakers.
three T&I sessions: The development                          The committees and task forces                                     Jeongwook Khang is the Chair of IGU’s
of technologies for minimising GHG                       with a membership of 897 from 49                                       Coordination Committee.

                                                                                                            Update on IGU’s current work programme 13
Meeting the world’s
 energy demands
 Qatargas provides quality LNG and other hydrocarbon products to the
 global market safely and reliably. We operate 14 mega LNG trains with
 a total production capacity of 77 million tonnes per annum, two of the
 world’s largest condensate refineries, two sales gas facilities, two
 helium plants, and a chartered fleet of 70 LNG vessels. Through
 efficient and reliable operations, commitment to our customers and
 the environment, we supply cleaner energy to the world.

The World’s Premier LNG Company
www.qatargas.com
Features
This issue’s features section starts with a report on the
impact of Coronavirus on gas markets in Latin America
and the Caribbean. Next up are two hydrogen articles,
the first looking at ways of producing hydrogen from
natural gas and the second at the roll-out of hydrogen
in Korea. Then we have a report from Portugal on a
smart gas metering pilot project and an article looking
at LNG as a marine fuel.

                                                            17
A better world
With natural gas as the world’s cleanest
and most efcient fossil fuel, Oman
LNG’s operations near the Omani city of
Sur, is helping to make for a better world.
Since starting production in 2000, we
have delivered over 2,300 cargoes to
customers, remaining a reliable supplier
of liqueed natural gas that is helping to
reduce carbon emissions and preserve
the earth’s natural environment for fu-
ture generations to enjoy.

For centuries, this beautiful coast-
bound nation of Oman was a trade
centre connecting different parts of the
world through vibrant and ourishing
commerce relations. Trade that suppor-
ted lives in far lands. At Oman LNG, we
continue that tradition of seafarers and
commerce through bringing energy to
many corners of the world.

Oman Liqueed Natural Gas LLC (Oman
LNG) is a joint venture company estab-
lished by a Royal Decree in 1994 operat-
ing under the laws of the Sultanate of
Oman. The company engages in the busi-
ness of producing and selling liqueed
natural gas (LNG), and its by-product, nat-
ural gas liquids (NGLs) and operates three
liquefaction trains at its plant in Qalhat, serve in Ras al Jinz in the eastern region   stimulating local business ventures by
South Sharqiyah Governorate.                of the country boasting one of the           enabling Small Medium Enterprises
                                            world’s largest breeding beaches for         (SMEs), a major cornerstone of Oman’s
Hand-in-hand with our operations Greenback Turtles.                                      economy, to ourish and providing
comes a strong health, safety and en-                                                    equal opportunities to compete for all
vironment performance. Our recent As a company our responsibility to our                 service contracts.
achievement of over 30 million man- staff, contractors and the community is
hours without a Lost-Time Injury (LTI) is to provide a safe environment so that          The company is a corporate and social re-
testament to our HSE excellence, and they can come to work and return                    sponsible organisation by maximising
an exemplary diligence and commit- home to their families, safely every day.             benets to the employees, stakeholders
ment to the safety of our people, envir-                                                 and community and has a well-designed
onment, and communities where we Through our empowerment philo-                          alignment between sustainable social
operate. Our processes meet the sophy, we continue to develop talent                     development and the business.
highest of ISO standards, which we are and help remove barriers to reach suc-
proud to maintain every year and our cess. Our aim is to develop all staff to            From powering large industries, to
ceaseless efforts to support the envir- their fullest potential. We support in-          keeping homes warm and the lights
onment through the sponsoring of country value through focused efforts                   on, Oman LNG is your reliable energy
various initiatives such as the Turtle Re- towards developing local talent and           partner.
pany’s social investment programmes            development plans implemented in
Perpetual sustainable                       have spanned the length and breadth            the Sultanate.
investments in the society                  of the country with thousands of pro-
of Oman                                     jects ranging from healthcare and edu-         Oman LNG Development Foundation
                                            cation to preserving the environment           supports Oman LNG’s ambitious vis-
Corporate Social Responsibility (CSR)       and road safety; reecting its sincere         ion and dedication towards CSR. The
has been an integral part of Oman LNG       interest to embed the principles of so-        Foundation champions private sector
with a focused objective: to deliver tan-   cial responsibility as part of its core ex-    contribution to the development of
gible value to Oman and its people          istence. Through strengthening the             Oman and its people, through CSR
through social investment by capital-       cooperation between the public and             and citizenship, as an active contrib-
ising on the country’s natural gas re-      private sector, the projects and pro-          utor to social and societal welfare,
source. The company allocates annually      grammes aim to supplement the                  and through proactively addressing
1.5% net income after tax (NIAT) to vari-   national economy and ambitious                 community needs.
ous social investment and sustainable
programmes; a commitment set when
the company was founded. In addition,
before the rst cargoes left the LNG
plant, the company invested in sustain-
able development projects for the com-
munity which speaks volumes about the
company’s business principles; that
Oman LNG’s initial investment in social
development began even before the
production line was fully functional.

Today, Oman LNG’s CSR programmes,
delivered through Oman LNG Develop-
ment Foundation, span the entire na-
tion and contribute to the socio-
economic development of the country.
Over the past nineteen years, the com-          omanlng.com        oman-lng-l-l-c-        @OmanLNG      Oman LNG       omanlngllc
F EATURES

The mixed impacts of
coronavirus on the Latin
American gas markets
In the run-up to the virtual Latin America and Caribbean Gas Conference in February 2021, and a pre-event on
November 26, organised by EnergyNet in partnership with IGU and supported by OLADE and ARPEL, this Wood
Mackenzie report looks at recent developments. By Mauro Chavez and Rodrigo Rosas

Latin America and the Caribbean is                         closely to industry development, and         measures tightened to contain the
one of the regions that have been hit                      so, industrial gas demand. With con­         spread of the coronavirus, the severity
harder by the coronavirus disease (see                     tinuous GDP growth since 2005, indus­        of economic impacts deepened while
Figure 1). The pandemic affected Latin                     trial gas demand had always moved in         also eroding energy needs.
America at a time of economic weak­                        the same direction – including the              Demand-side impacts are already
ness and macroeconomic vulnerability.                      period between 2007-2009 when both           visible. The coronavirus pandemic has
The mix of external and domestic                           declined due to the global financial         taken its toll over industrial activity
factors could pose challenges for the                      crisis and the swine flu pandemic.           and the whole market, reducing
development of the gas and power                                 Once again, history repeats itself.    energy needs significantly. In April,
industries in the region.                                  Since 2019, GDP growth has slowed            we observed a 6.1% decline in elec­
                                                           due to political and regulatory              tricity demand year-over-year, while
Mexico                                                     uncertainties causing turmoil in the         gas decreased by 10% compared to
Gas markets have suffered as industrial                    Mexican economy. Before the corona­          the previous month.
activity has stalled in the last months.                   virus crisis, we estimated Mexico’s eco­        According to Wood Mackenzie’s
For Mexico, Covid-19 impacts are evi­                      nomic activity would regain momen­           analysis, a 5% decline year-over-year
dent. Mexico’s GDP expansion is tied                       tum in 2020. But, as social distancing       in domestic gas demand can be
                                                                                                        expected, affecting the two engines
                                                                                                        of growth; the industrial and power
         GDP growth in Latin America 1990-2020                                                          sectors (see Figure 2). However, a

                   15%
                                                                                                        glimmer of hope remains on the
  GDP growth (%)

                   10%                                                                                  horizon. While the country is facing
                    5%                                                                                  new regulatory changes impacting
                      0                                                                                 renewable energy investments, gas-
                   -5%                                                                                  based capacity remains the base-
                   -10%                                                                                 load technology.
                   -15%                                                                                    Just in 2020, close to 3 GW of
                      1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
                                                                                                        flexible and highly efficient combined-
                           Latin America & Caribbean    Mexico          Brazil       Argentina          cycle plants are scheduled to start
                                                                                                        operations, which follows several new
Figure 1.

20 The mixed impacts of coronavirus on the Latin American gas markets
F EATURES

                                                                                                                                                       supply below our previous forecast
    Mexico gas demand forecast                                                                                                                         until the 2040s, featuring a material
         8                                                                                                                                             price premium for Henry Hub. These
 bcf/d

         7                                                                                                                                             effects quickly cascade down to
         6
         5
                                                                                                                                                       Mexico, pressuring prices upward.
         4                                                                                                                                             We anticipate a national average of
         3
                                                                                                                                                       US$3.8/mmbtu in 2021-2025, an
         2
         1                                                                                                                                             increase of 53% from current levels.
         0
                       2015                  2016                  2017                     2018                 2019                  2020

                     Power               RCA*                Industrial                 Oil & Gas**              Pre-coronavirus forecast
                                                                                                                                                       Brazil and Bolivia
             * RCA = Residential, commercial and agriculture **Oil & Gas excludes Pemex E&P demand                                                     Brazil is one of the countries that
                                                                                                                                                       suffered the most in terms of gas
Figure 2.                                                                                                                                              demand reduction (see Figure 3).
large combined-cycle plants in 2019                                             per day on average by year-end,                                        Due to this gas demand reduction,
as well. Although no material growth                                            despite the fact that Permian gas                                      Petrobras had to force thermal power
in gas demand for 2020 awaits, over                                             production is 13% lower from March                                     operation to maintain the minimum
the long term, we remain confident                                              peak levels after a series of shut-in                                  feed gas volumes required to ensure
the market will continue to grow at                                             wells. Looking ahead, US piped imports                                 the integrity of its upstream produc­
2% (compound annual growth rate)                                                remain as the primary supply source,                                   tion. This came along with a set of
throughout 2040.                                                                increasing by 42% in 2030, reaching                                    force-majeure claims, including the
    Pipeline imports from the United                                            the 7.3 bcf (204 mcm) per day mark.                                    sole longstanding import agreement
States saw a significant decrease in                                                  Following an unprecedented oil                                   between state-owned companies
April, following the pandemic effects.                                          market collapse, North American                                        Petrobras and Bolivia’s YPFB.
Our pre-coronavirus forecast consi­                                             associated gas supply has been sharply                                     April 2020 was extremely difficult
dered 5.4 bcf (151 mcm) per day from                                            hit. Even as oil prices recover, we                                    for Bolivia’s gas market, as Brazil’s
pipeline imports, but as mentioned                                              expect a lower rig-to-price relationship,                              offtake hit a record low of 10 mcm/d,
before, the economy took a heavy                                                meaning a North American associated                                    and Argentina was importing just 10.5
blow. Economic activity decreased
by 17.3%, while imports fell by 14%
(4.6 bcf or 129 mcm per day) month-                                                   Demand gas reduction in Brazil due to coronavirus crisis
                                                                                                     76.0
over-month.                                                                                 80
                                                                                    Mcm/d

                                                                                            70                                                 0.2      66.0
    However, recovery in gas flows                                                                                 -3.2
                                                                                            60                                     -7.0
                                                                                                                                                                                                     54.4
is already visible, as the lockdown                                                                                Difference in demand Feb-Mar                     -7.5
                                                                                            50                                                                                  -3.3       -0.8
measures began to be eased in early                                                         40
                                                                                                                                                                    Difference in demand Mar-Apr

June. With the completion of the                                                            30

Wahalajara corridor – a pipeline linking                                                    20

                                                                                            10
the Waha play in the USA’s Permian
                                                                                             0
basin with Guadalajara in Mexico –                                                               February 2020                                       March 2020                                    April 2020

in mid-2020, we estimate pipeline                                                                  Power sector           Fertiliser      Refinery   Local distribution companies (LDCs)

imports to recover to 5.2 bcf (146 mcm)
                                                                                Figure 3.

                                                                               The mixed impacts of coronavirus on the Latin American gas markets 21
F EATURES

mcm/d. And on top of that, domestic           reform in Brazil, as Petrobras currently      economy was struggling. The govern­
demand fell to to 7 mcm/d, and on             controls 100% of transport capacity,          ment at the time capped prices to end-
some weekends 4 mcm/d. This created           which avoids commercialisation bet­           users in an attempt to support the
an issue to manage reservoir integrity        ween independent pre-salt producers           economy. However, price regulation
for non-associated gas fields.                and local distribution companies,             proved uneconomical for producers,
   Gas consumption in the power               thermal power plants and industries.          and upstream investment stalled,
sector will be the most affected in           At the writing of this report, the            causing supply to go into decline.
the long-term. In recent years, Latin         Congress has approved the vote of the           The drop in production eventually
America held a set of auctions for            New Gas Law, which will provide legal         created supply shortfalls, and ulti­
renewable projects that resulted in           background for new gas transport              mately the government introduced gas
a capacity expansion for electricity          agreements using the entry-exit tariff        price subsidy regimes from 2013 to
using demand forecasts based on               system. This was not encompassed by           resuscitate the country’s exploration
high GDP performance. Therefore, the          the 2009 Gas Law.                             and production sector.
oversupply of renewables has become              Coronavirus and the oil price crash          Argentina appears to be reviving
more critical with electricity demand         have also resulted in major capex             this approach. The new administration
destruction in the medium-term, and           investment cuts in the region. Wood           is introducing intervention to cap gas
this will result in low utilisation factors   Mackenzie’s upstream team estimates a         prices to support the country’s strugg­
of thermal power plants and limited           capital spend down by 39% in 2020 in          ling economy. As history has shown us,
opportunities for thermal power               Latin America compared to pre-crash           there will be a supply decline response.
auctions in South America.                    levels; and the countries most affected       Unlike before, these days 40% of
   Brazil continues to attract M&A            are Venezuela, Brazil and Argentina.          production is from steep-declining
investments, as Petrobras is executing                                                      unconventional fields. This indicates
according to schedule its commitments         Argentina                                     that supply shortfalls will be steep and
to divest gas transport and distribution      In the case of Argentina, on top of the       swift. Having ended the contract for
assets in Brazil. Over this year, Petrobras   macroeconomic and coronavirus crisis,         one of its two floating storage and
is selling its 51% participation in           the new administration started gas            regasification units (FSRUs) in 2018,
Gasbol, 10% participation in NTS, the         price control measures. To maintain           the country is now likely to need to
transport company of the southeast            low gas prices for end-users, the new         bring back an FSRU as soon as next
of Brazil, and 51% in Gaspetro, the           administration has imposed a tariff           year, and LNG imports are likely to rise
holding that owns 19 local distribution       freeze until the end of 2020.                 over US$0.7 billion by 2022 from
companies across Brazil. In July, it             Enargas, the national gas regu-            US$0.4 billion in 2019. As LNG imports
concluded the sale of its remaining           latory agency, uses an exchange rate          are paid by the Argentinian state
10% of the gas pipeline company TAG           of ARS$42/US$1 for gas prices to regu­        energy company, IEASA, with transfers
to the consortium Engie and CDPQ,             lated users when nowadays the                 from the national treasury, this could
a Canadian institutional investor.            exchange rate is over ARS$70/US$1.            add more stress to Argentina’s capacity
   In 2020, it was expected that there        In addition to this, Enargas has not          to pay external debt.
would be a public call to tender trans­       revised its transportation and
port capacity for NTS and TAG, but this       distribution tariffs since April last year.   Chile
is likely to be postponed to 2021. This          Argentina has been in a similar            For Chile’s gas market, the sharp
is pivotal for the desired gas market         situation before. In 2002, the country’s      decline in Argentina’s domestic

22 The mixed impacts of coronavirus on the Latin American gas markets
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F EATURES

                                                                                                                                        c El Salvador’s gas-
                                                                                                                                        to-power project will
                                                                                                                                        see the start of LNG
                                                                                                                                        imports by the end
                                                                                                                                        of 2021. Work has
                                                                                                                                        started on a regasi­
                                                                                                                                        fication module that
                                                                                                                                        will be installed
                                                                                                                                        onboard the BW
                                                                                                                                        Tatiana (formerly the
                                                                                                                                        Shell tanker Gallina)
                                                                                                                                        which is being
                                                                                                                                        converted into an
                                                                                                                                        FSRU by BW LNG.

production will compromise gas           and the Dominican Republic report                                  from oil-fired generation to decrease
piped imports. Fortunately for the       an increase in LNG imports. However,                               its exposure to price volatility, reduce
Chilean buyers, this is happening        we expect LNG imports to decrease                                  generation costs and comply with
in a record low LNG price environ-       by 4% from our pre-coronavirus                                     environmental policies.
ment, so importing LNG is at rela-       forecast for both islands.
tively little incremental cost to            The pandemic effects leave our                                 Mauro Chavez is a Principal Analyst and
Argentinian pipeline imports. And        view in the Caribbean relatively                                   Rodrigo Rosas is a Senior Analyst both
Chile could increase its LNG imports     unchanged over the next years, given                               covering Latin America gas and LNG at
to support its coal decommission-        the signifi­cant efforts to shift away                             Wood Mackenzie (www.woodmac.com).
ing programme.

Caribbean                                    LNG imports in Latin America and the Caribbean 2013-2020

In the Caribbean, there are mixed                  18
                                           mmtpa

stories. In Puerto Rico, the biggest               16                                                                                     Puerto Rico
                                                   14                                                                                     Panama
LNG market in the region shows a
                                                   12                                                                                     Mexico
notable decrease in LNG imports                                                                                                           Jamaica
                                                   10
due to the combined impact of the                                                                                                         Dominican Republic
                                                    8
                                                                                                                                          Colombia
earthquake in early January and                     6                                                                                     Chile
coronavirus. Accord­ing to the US                   4                                                                                     Brazil
                                                                                                                                          Argentina
Department of Energy, between                       2

January and April, the island received              0
                                                        2013       2014      2015       2016      2017      2018       2019      2020
8.274 bcf (232 mcm), a 60% decline
                                              Note: El Salvador and Nicaragua are expected to start LNG imports by the end of 2021.
year-over-year. In contrast, Jamaica
                                         Figure 4.

24 The mixed impacts of coronavirus on the Latin American gas markets
F EATURES

Cost-effective and clean ways
of producing hydrogen from
natural gas
Hydrogen has an important role to play in meeting climate targets and can be produced from natural
gas with zero greenhouse gas emissions. Here we look at developments that can be applied in the EU.
By Alexander Ishkov, Konstantin Romanov, Roman Teterevlev and Maximilian Kuhn

The step-by-step decarbonisation                              as studies consistently indicate that       of natural gas, which produces in the
of the EU’s energy system based on                            hydrogen produced from water by             order of 9 kg of CO2e per kg of hydro­
expanding the use of natural gas, using                       electrolysis using renewable energy         gen. However, the proposed carbon
methane-hydrogen blends and pro­                              will be significantly more expensive        intensity target is half this which
ducing hydrogen from natural gas can                          than low- and zero-carbon hydrogen          means that the continued use of con­
reduce greenhouse gas emissions                               produced from natural gas, certainly        ventional steam methane reforming
(GHG) by up to three-quarters.                                up to 2050 and probably beyond. This        (SMR) would require a substantial
   Indeed, the long-term potential of                         is because water electrolysis is highly     scaling up of carbon capture, use
natural gas lies in the possibility of                        energy intensive, requiring between         and storage technologies (CCUS).
producing CO2 emissions-free hydro­                           48 and 77.5 kWhel per kg of hydrogen
gen from methane. This will be vital                          produced (based on published data).         Methane pyrolysis
for the EU to achieve its objective of a                          Currently, hydrogen is most com­        An alternative and highly promising
cost-effective decarbonisation policy,                        monly produced via steam reforming          hydrogen production method is
                                                                                                          methane pyrolysis which decomposes
                                                                                                          methane into hydrogen and solid car­
   Methane pyrolysis has significant potential to create                                                  bon in the absence of oxygen and, thus,
   new market opportunities
                                                                                                          without direct CO2 emissions. A high
                                                                                                          temperature above 1,000ºC is neces­
                    METHANE PYROLYSIS
                4                                                                   1   Low carbon        sary for the thermal decompo­sition.

      GAS                   THERMAL PYROLYSIS

                            CATALYTIC PYROLYSIS
                                                                           Н
                                                                        hydrogen
                                                                                        Cost effective    The use of a catalyst helps to increase
                                                                                                          the reaction rate and thus reduces the
                                                                           1.008
                                                                                            The EU        reaction temperature. Different tech­

                            PLASMA PYROLYSIS                                        6       market        nology routes are based on methane

  Grid / RES
                            MOLTEN MEDIA
                            PYROLYSIS
                                                                           C
                                                                         carbon         Environmentally
                                                                                                          pyrolysis including thermal, catalytic
                                                                                                          (as well as thermo-catalytic), plasma
                                                                           12.011       friendly          and molten-media processes.
                                                                                                             Major EU companies and institutes

   Note: Hydrogen atomic number 1 and atomic mass 1.008; Carbon atomic number 6 and atomic mass 12.011.
                                                                                                          such as BASF, the Institute for Advanced
                                                                                                          Sustainability Studies (IASS), the

26 Cost-effective and clean ways of producing hydrogen from natural gas
F EATURES

                                                                                      readiness levels are based on a scale
                                                                                      from 1 to 9 with 9 being the most
                                                                                      mature technology.)
                                                                                         The energy required for the
                                                                                      pyrolysis reaction can be provided by
                                                                                      grid or renewable electricity, natural
                                                                                      gas feedstock or hydrogen produced
                                                                                      as part of the process. The electricity
                                                                                      consumption for methane pyrolysis
                                                                                      is estimated at up to 20 kWh per kg
                                                                                      of hydrogen.

                                                                                      Uses of solid carbon
                                                                                      Solid carbon is a valuable material for
                                                                                      the industrial and building sectors as
Karlsruhe Institute of Technology (KIT),    catalytic methane pyrolysis. Russian      well as in electrical engineering and
Linde and Thyssenkrupp have focused         companies such as Gazprom are inv­        electronics, which allows for an overall
on a thermal decomposition process          estigating plasma methane pyrolysis.      optimisation of production costs.
and molten metal systems. Monolith in       The technological maturity of methane        Carbon black is used as a reinforcing
the USA is pursuing plasma technology       pyrolysis pro­cesses is estimated to be   filler in the manufacture of car tyres
and the Australian Hazer Process uses       in the range of TRL 4-8. (Technological   and also as a pigment in plastics,

z As well as
hydrogen, methane
pyrolysis produces
high-purity, granular
carbon.
v BASF is one of the
companies experi­
menting with methane
pyrolysis in special
laboratories and it is
working to implement
the process on a
pilot scale

                                           Cost-effective and clean ways of producing hydrogen from natural gas 27
F EATURES

                                                                                                           c Carbon nanotube
                                                                                                           filaments, called
                                                                                                           yarn, can be com­
                                                                                                           bined with carbon
                                                                                                           fibre to make
                                                                                                           toughened braided
                                                                                                           textiles. The strong,
                                                                                                           lightweight material
                                                                                                           is cured with a
                                                                                                           polymer matrix to
                                                                                                           strengthen compo­
                                                                                                           sites for aircraft
                                                                                                           applications like fan
                                                                                                           blades and fuselage
                                                                                                           components.

printing inks and paints. Other uses of     carbon. Carbon fibres are used as part   technologies is that these technologies
carbon black include as an ultraviolet      of composite materials. Graphene is a    can potentially use methane from any
(UV) stabiliser in plastic pipes and in     relatively new material known for its    source, including biomass, industrial
electronics. To facilitate handling, car­   high strength and conductivity with      and animal waste as well as sewage,
bon can be formed into pellets. Carbon      applications in the aerospace and        and can be an important part of the
is non-toxic should components leach        automotive sectors, for wind turbines    EU’s future circular economy. In
out or release into groundwater when        and in construction. Possible appli­     addition, they can be used in the
stored underground.                         cations include semiconductors,          regions where CCUS is unavailable thus
   Another solid carbon product,            batteries and electronics. Nanotube      expanding the opportunities for low-
synthetic graphite, can be used as an       carbon is used in polymers, plastics     and zero-carbon hydrogen production
anode in lithium-ion batteries, which       and batteries.                           in the EU. Unlike gaseous CO2, solid
are used in portable electronic devices       The utilisation for soil improvement   carbon is easy to store and is non-toxic.
such as smart phones, cordless devices      with positive environmental effects
or power tools and electric vehicles.       (long-term carbon soil sequestration)    Economic and emissions benefits
Synthetic graphite can also be used         is another market for solid carbon.      Perhaps most importantly, hydrogen
as an electrode in steel production in        The production of solid carbon as      produced from natural gas via methane
electric arc furnaces or as a refractory    a part of the hydrogen production        pyrolysis can have truly zero and even
(heat-resistant material) in furnaces       process will therefore not only reduce   negative emissions. These hydrogen
and crucibles.                              GHG emissions but will also create new   technologies produce no direct СО2
   Other carbon products include            market opportunities. Another compe­     emissions, and their indirect emissions
graphene, carbon fibres and nanotube        titive advantage of methane pyrolysis    depend on the carbon footprint of

28 Cost-effective and clean ways of producing hydrogen from natural gas
F EATURES

natural gas and electricity used to          of hydrogen) and steam reforming                 developing hydrogen energy in the
power the process.                           ($1.03-$2.16 per kg of hydrogen).                EU. A step-by-step decarbonisation
   Technologically driven minimal                                                             of the EU economy based on the use
fugitive methane emissions from              Technology neutrality                            of methane-hydrogen fuel and later
properly sourced and transported             In the light of these facts, when realis­        hydrogen could ensure the cost-
natural gas, objectively verified, could     ing the EU’s Hydrogen Strategy, it is            effective achievement of the EU’s
be potentially offset through                important that the technology neutral­           climate goals for 2030 and 2050 while
compensatory measures (for example,          ity principle is upheld. Life cycles             using existing gas infrastructure for
[re-]forestation). And where renewable       embracing all sustainable development            natural gas supplies as a feedstock for
electricity is used, the carbon intensity    criteria and externalities – including           hydrogen production.
of the process is substantially reduced.     but not limited to GHG emissions –
   The carbon intensity of hydrogen          need to be fully taken into account.             Professor Alexander Ishkov is Deputy
produced by plasma methane pyrolysis            Implementing discriminatory                   Head of Gazprom’s Strategy Department
is estimated at 1.2-1.6 kg of CO2e per       mechanisms aimed against hydrogen                – Head of Directorate and a Doctor in
kg of hydrogen (taking into account          produced from natural gas in compli­             Chemistry. Dr Konstantin Romanov is
the transportation of gas via Nord           ance with carbon intensity require­              Head of Division at Gazprom’s Strategy
Stream and the use of renewable              ments could result in a cost-inefficient         Department and a member of IGU’s
power – wind, solar). Thus, the              decarbonisation policy in the EU and             Distribution Committee. Roman
hydrogen produced by methane                 even might lead to an increase in                Teterevlev is Deputy Head of Division at
pyrolysis corresponds to “low-carbon         GHG emissions.                                   Gazprom’s Strategy Department and a
hydrogen” in accordance with the                It therefore makes sense to exploit           member of IGU’s Strategy Committee.
published EU Hydrogen Strategy.              the ecological, economic and techno­             Dr Maximilian Kuhn works in Group
By way of comparison, the figures            logical advantages of natural gas while          Relations (GR/PR) at Gazprom Germania.
for electrolysis (wind, solar) stand at
0.6-3.7 kg of CO2e per kg of hydrogen
(the assessment takes into account
the following stages: the construction
of units, supplies of feedstock,
direct emissions).
   Furthermore, and pending further
research into using sea water, scaling
up water electrolysis technology in the
EU would require significant quantities
of pure water.
   Methane pyrolysis also offers advan­
tages from an economic point of view.
With hydrogen production costs of
$1.36-$1.79 per kg currently forecast in
the literature, pyrolysis is compe­titive
with electrolysis ($4.61-$14.87 per kg       A researcher examines a wafer with carbon nanotubes.

                                            Cost-effective and clean ways of producing hydrogen from natural gas 29
Green gas deployment
Naturgy promotes the generation of renewable natural gas in Spain, a booming green fuel
that is part of decarbonisation, contributing to the fight against climate change and is also
part of the future Circular Economy.

The gas industry, like the rest of the        the system and, specifically, in France    pursue an important number of initiatives
productive sectors in Spain, is placing       it is expected that by 2050 all gas will   related to the various forms of RNG,
increased emphasis on their environ-          be renewable”, points out the Spanish      investigating: the upgrading of biogas,
mental performance and strategy. In this      Gas Association (Sedigas).                 generated from waste products or crops to
respect, it is striking to see how the gas       Sedigas believes that half of the       produce biomethane; and the gasification
sector has been promoting numerous            domestic demand for gas in Spain           of biomass, crops and or residuals to
renewable natural gas generation activities   could be covered by 2030 with renew-       produce renewable synthetic gas that is
and projects over recent years, a new         able gas given the volume of existing      then treated to produce Bio-SNG.
green fuel that is expected to displace       waste products.                               In 2019 Nedgia (the gas distribution
a considerable part of natural gas               This potential volume of renewable      subsidiary of the Naturgy group) injected
consumption in the future.                    gas production could be equivalent to      renewable natural gas (biomethane) for
   The increase in the use of renewable       a quarter of the current demand for        the first time in its distribution network.
natural gas can lead to a significant         gas in Spain in the most conservative      It was RNG produced from the upgrading
reduction in greenhouse gas emissions         case, and even “up to 65% of the current   of biogas that is generated in the treat­
when it is injected into the natural gas      demand for natural gas provided that its   ment of waste water sludges in the Waste
distribution network or used as fuel in       development is promoted decisively and     Water Treatment Plant (WWTP) in
the transport sector. According to many       without longer delay”, as explained by     Butarque, Madrid. The facility, operated
experts it is expected that this energy       the experts Xavier Flotats and Álvaro      by Nedgia, is part of the activities of the
will contribute significantly to the          Feliu, authors of the report “Los gases    European ECO-GATE consortium project
decarbonisation of the gas sector in          renovables. An emerging energy vector”,    to promote sustainable mobility that is
coming years.                                 published by the Naturgy Foundation in     cofinanced by the European Union
   European countries such as Germany,        June 2019.                                 through the CEF-Transport programme.
the United Kingdom, Denmark or                                                              Another representative projets being
Sweden are leading the way in the             Naturgy, in the lead                       carried out by the company is called
development of this new energy vector         Naturgy has been working for several       Unidad Mixta de Gas Natural Renovable
with a large number of biomethane             years on promoting RNG in Spain.           in Spanish. This project is a joint initiative
production plants already in operation,       The company’s activities have focused      being carried out by Naturgy and the
while in countries such as France, Italy,     on the realisation of pilot projects to    technology centre Energylab located
and the Netherlands there are already         investigate RNG production with the        in Vigo, Spain with the Bens WWTP
measures in place promoting the develop­      final ambition to maximise yields while    located in A Coruña, north-west Spain.
ment of these plants. “In Europe there are    reducing production costs. The company     The principal aim of the project is to
700 plants injecting renewable gas into       has participated in and continues to       investigate various new technologies
                                                                                         to obtain improvements in the production
                                                                                         of biogas, biomethane and in the
                                                                                         development of a novel bio-methanisation
                                                                                         concept. The project is financed by the
                                                                                         European Union within the framework of
                                                                                         Programa Operativo FEDER Galicia 2014-
                                                                                         2020. The biomethane produced so far
                                                                                         has served to fuel an interurban bus in
                                                                                         the A Coruña area and three operating
                                                                                         vehicles from the plant, together making
                                                                                         journeys of 135,000 km. In total, this
                                                                                         small research project led to a reduction in
                                                                                         emissions of around 6,000 tonnes of CO2
A bus in Galicia (Spain) fuelled by RNG.                                                 in 2019.
Helping the planet
means investing
in the environment.
That’s why we’ve invested over 1.4 billion
euros in renewables over the last 3 years,
thereby supplying 3 million homes with
energy from the wind, water and sun.

naturgy.com
F EATURES

The roll-out of hydrogen
in Korea
Hydrogen has a major role to play in decarbonisation around the world but Korea is so far
the only country to have enacted a hydrogen law. By Yoon Namgoong

With the drive to combat climate               the Hydrogen Law on January 9, 2020          of the by-product hydrogen was used
change, moves to transition from the           provided a legal basis and a much-           outside the complexes being supplied
carbon economy to a hydrogen eco­              needed driving force to usher in the         via pipelines totalling 200 km in length
nomy are picking up pace around the            hydrogen economy.                            (280,000 tons) and 540 tube trailers
world. Many countries are developing             At present, major advanced coun­           (20,000 tons).
policies to grow the hydrogen energy           tries such as Japan, the US and mem­            In terms of utilisation, Hyundai
market and Korea is no exception,              bers of the EU are pushing ahead with        Motor has emerged as a world leader
seeing hydrogen as a new engine for            various policies to foster the use of        in hydrogen fuel cell technology by
economic growth with a key role to             hydrogen, but Korea is the only coun­        launching the world’s first mass-
play in the country’s shift to a low-          try that has enacted a law to under­pin      production fuel cell electric vehicle
carbon economy over the long term.             the systematic and effective develop­        (FCEV), Tucson ix, in 2013. The total
   The Korean government released a            ment of the hydrogen economy.                number of FCEVs jumped to 5,083 in
roadmap for ramping up the hydrogen                                                         2019, which is 5.7 times higher com­
economy on January 17, 2019. Subse­            Current status of Korea’s hydrogen           pared to 2018, served by 34 hydrogen
quently, it announced follow-up plans          industry                                     refuelling stations (see Table 1). Keeping
to build hydrogen infrastructure and           In 2019, Korea’s hydrogen production         up the pace, the Korean government
refuelling stations (October 22, 2019)         reached about 2 million tons, out of         plans to have 10,280 FCEVs including
along with a hydrogen technology               which 70% was by-product hydrogen            buses in operation by the end of 2020.
development roadmap (October 31,               generated from the petroleum refining           As of 2019, there were 3,208 fuel
2019) and comprehensive measures for           process, mainly from three large-scale       cells installed in Korea for power gen­
safety management (December 16,                petrochemical complexes in Ulsan,            eration and residential use. Of these,
2019). Most notably, the enactment of          Yeosu and Daesan. About 300,000 tons         41 fuel cells for power gener­ation have
                                                                                            a total capacity of 308 MW and 3,167
                                                                                            fuel cells for residential use have a total
   Fuel cell electric vehicles and refuelling stations in Korea                             capacity of 7 MW. Fuel cells for power
                  Actual			              Projection                                         generation are more advanced in
   Year           2017   2018    2019    2022                       2040
                                                                                            terms of capacity and technology than
   Production 177 891 5,083              81,000                     6,200,000
   of FCEVs				                          (67,000 for domestic use   (2,900,000 domestic     fuel cells for residential use.
   				                                  and 14,000 for export)     and 3,300,000 export)      In terms of hydrogen production,
   Hydrogen       12     14      34      310                        1,200
                                                                                            Korea obtains abundant by-product
   refuelling
   stations                                                                                 hydrogen, but the country is still in its
                                                                                            infancy when it comes to hydrogen
Table 1.

32 The roll-out of hydrogen in Korea
F EATURES

production technology, especially
related to natural gas reforming and              Korea’s hydrogen supply

water electrolysis on a large scale.              Year                 2018                     2022                    2030                     2040
                                                  Supply               130,000                  470,000                 1.94 million             5.26 million
   Currently, hydrogen is transported
                                                  (=demand)            tons/ year               tons/year               tons/year                tons/year
by tube trailers and low pressure                 Means of
                                                    ① By-production ① By-production                                     ① By-production          ① By-production
pipelines, which means that there is a            supply
                                                     hydrogen       hydrogen                                              hydrogen                 hydrogen
                                                    ② Hydrogen      ② Hydrogen                                          ② Hydrogen               ② Hydrogen
need to develop high pressure pipe­                  from SMR        from SMR                                             from SMR                 from SMR
lines and liquefaction facilities. An             		                ③ Water                                             ③ Water                  ③ Water
                                                  		                 electrolysis                                         electrolysis             electrolysis
evaluation of the competiveness of                			                                                                   ④ Production             ④ Production
Korea’s hydrogen industry is shown                			                                                                     abroad                   abroad
                                                  			                                                                   * ①+③+④=50%,             * ①+③+④=70%,
in Table 2.                                       			                                                                   ②=50%                    ②=30%
                                                   Price               –                        6,000 KRW/kg             4,000 KRW/kg            3,000 KRW/kg

Korea’s hydrogen economy                          Note: SMR = Steam methane reforming.
                                                  Source: Ministry of Trade, Industry and Energy, Hydrogen Economy Roadmap of Korea, January 2019.
roadmap
In January 2019, the Korean govern­            Table 3.

ment announced an ambitious fuel               becoming a leading hydrogen                                     of hydrogen and 6.2 million FCEVs
cell initiative entitled “Hydrogen             economy by 2040.                                                (3.3 million for export and 2.9 million for
Economy Roadmap of Korea”. The                    The government’s aim is to reach an                          domestic use, the latter served by 1,200
roadmap sets out Korea’s vision of             annual production of 5.26 million tons                          hydrogen refuelling stations) by 2040.
                                                                                                               The government also aims to increase
                                                                                                               the combined capacity of fuel cells for
   Competitiveness evaluation of Korea’s hydrogen industry
                                                                                                               power generation to 15 GW (domestic,
   Classification			                                                            Competitiveness                8 GW and export, 7 GW) by 2040.
   Supply Hydrogen               By-production hydrogen                         High
                                                                                                                   In 2040, 70% of the total hydrogen
   side   production             Natural gas reforming with carbon              Low
   		                              capture and storage                                                         production is forecast to come from
   		                            Electrolysis on a large scale                  Low
                                                                                                               by-product hydrogen together with
     Hydrogen                    Low pressure piping                            Moderate
     storage and                 Tube trailers                                  Moderate                       water electrolysis and overseas pro­
     transportation              High pressure piping and composite             Low                            duction, and hydrogen reformed from
   		                              container
   		                            Liquefaction and transportation                Low                            natural gas will account for the remain­
               Hydrogen          Installation cost                              Moderate                       ing 30% (see Table 3). According to the
               charging          The number of installed stations               Moderate
                                                                                                               roadmap, Korea will focus on improv­
   Demand Residential use        The number of distributed products             Low
   side   (fuel cells)           The competitiveness of companies and           Moderate                       ing the scalability of hydrogen produc­
   		                             related technology
                                                                                                               tion and enable hydrogen mass pro­
     Power generation            The number of distributed products             High
     (fuel cells)                 and capacity                                                                 duction by developing water electrolysis
   		                            The competitiveness of companies and           High                           technology in conjunction with solar
   		                             related technology
                                                                                                               and wind power generation by 2022.
     Transport use               The number of distributed FCEVs                High
     (fuel cells)                The competitiveness of Hyundai Motor           High                           The Korean government also plans to
   		                             and related technology
                                                                                                               establish overseas hydrogen production
               Hydrogen-fired    The competitiveness of companies and           Low
               gas turbines       related technology                                                           bases and import hydrogen for
                                                                                                               domestic uses.
Table 2.

                                                                                                           The roll-out of hydrogen in Korea 33
F EATURES

                                                                                                                         Under this roadmap, KOGAS
                                                                                                                   plans to build 25 hydrogen-producing
                                                                                                                   facilities and operate 500 tube trailers
                                                                                                                   and pipelines totalling 700 km in
                                                                                                                   length to deliver hydrogen produced
                                                                                           c Hyundai Motor’s       at the facilities by 2030. KOGAS aims to
                                                                                           second-generation       build 100 hydrogen refuelling stations
                                                                                           fuel cell electric
                                                                                           vehicle, the NEXO       by 2022 through HyNet, a public-
                                                                                           introduced in 2018,     private special purpose company.
                                                                                           offers more power
                                                                                           and has a lighter
                                                                                                                   To implement the roadmap up to 2030,
                                                                                           powertrain.             KOGAS has set aside a budget of
                                                                                                                   4.7 trillion KRW ($4.01 billion).
   For hydrogen transportation, in                              an attempt to facilitate the govern­
addition to the existing tube trailers,                         ment’s strong drive towards the                    CO2 reduction by ushering in the
Korea will lay out a nation-wide hydro­                         hydrogen economy. KOGAS plans to                   hydrogen economy
gen pipeline network in the long term.                          supply hydrogen to refuelling stations             In compliance with the 2015 Paris
The target price for hydrogen by 2040 is                        to the tune of 100% of the demand for              Climate Agreement, the Korean
3,000 KRW/kg ($2.42/kg), and hydro­gen                          FCEVs, and just under 60% of the                   government decided in December
will be supplied at the same price across                       demand for fuel cells and mixed power              2016 to cut greenhouse gas emissions
the country, regardless of distance.                            generation. Specifically, out of the               by 37% from its business-as-usual level
                                                                Korean government’s 2040 supply                    (BAU: 851 million tons CO2-equivalent)
Hydrogen industry promotion                                     target of 5.26 million tons, KOGAS                 by 2030 (domestic 25.7%, overseas
roadmap of KOGAS                                                plans to supply 3.45 million tons or               reduction 11.3%). However, in July
KOGAS released its “Hydrogen Industry                           66% of the national hydrogen demand                2018, the government announced a
Promotion Roadmap” in April 2019 in                             (see Table 4).                                     revised plan that lowered its overseas

                                                                                                                                          c Table 4.
   Hydrogen industry promotion roadmap of KOGAS
   			                                                                 2022                   2030                 2040
   Mobility
     Government FCEVs                                                  81,000                 2,284,000            6,200,000
   			                                                                 (67,000 domestic)      (108,000 domestic)   (2,900,000 domestic)
   		                                  Domestic demand (tons)          29,150                 469,500              1,014,500
                     KOGAS	Proportion (%)                              100                    100                  100
   		                                  Supply (tons)                   29,150                 469,500              1,014,500
   Fuel cells        Government        Power generation (GW)           1.5 (1 domestic)       5 (2.5 domestic)     15 (8 domestic)
   		                                  Residential use (MW)            50                     1,000                2,100
   		                                  Domestic demand (tons)          441,000                1,470,000            4,242,000
                     KOGAS             Power generation (tons)         420,000                1,050,000            2,000,460
   		                                  Residential use (tons)          21,000                 210,000              441,000
   		                                  Proportion (%)                  100                    85.71                57.55
   		                                  Supply (tons)                   441,000                1,260,000            2,441,460
   Source: KOGAS, Hydrogen Industry Promotion Roadmap, April 2019.

34 The roll-out of hydrogen in Korea
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