By John Balsdon and Matthew Brown

By Way of Background

Gas to power (G2P) projects provide an effective solution to power shortages around the globe. As the global demand for power continues to rise, outstripping supply in many nations across the world, existing power generation facilities cannot meet the needs of fast-growing economies and available domestic fuel sources are in many of those economies declining.  G2P has the potential to deliver cleaner, more accessible energy to power the engine of global growth, and the next generation of G2P projects will likely underpin a new era in energy production.

G2P projects span the full energy value chain — covering gas production, treatment, transport and power generation. More than 50 G2P projects have been announced across the globe, and countries continue to announce new innovative programmes. Ghana and Chile are among the countries that have recently implemented G2P projects. And the Philippines, Indonesia, and Vietnam are among those likely to turn to G2P to satisfy their future energy needs.

What Is Powering G2P?

Soaring demand for power in developing nations is a key factor in the drive for to G2P. In many such nations there is a huge deficit in power generation capacity required to meet both industrial and domestic needs.  As a consequence, countries in Africa, Asia, and South America have launched G2P projects to satisfy their power demands, and the opportunities are plentiful. For example, Nigeria, a country with a population three times larger than the UK, has a small fraction of Britain’s power generation capacity. Therefore, countries with large gas reserves, like Nigeria, have the potential for a myriad of new G2P projects.

G2P projects also are increasingly cost effective.  Since mid-2014, increased LNG production, including in Australia and the United States, has been a material factor contributing towards a fall in LNG prices.  New markets, such as eastern Africa, will further add to global LNG resources in the next few years adding to the supply and as a result G2P will become increasingly attractive from a cost perspective.

Global environmental and social factors are also likely to increase the number of global G2P projects. These factors are driving reduced carbon emissions and a shift from traditional thermal coal and hydrocarbons to gas as well as renewable energy.  Governments and lenders are more willing to fund clean energy projects, like G2P, and less willing to lend to projects that raise environmental concerns.

Gas storage and transportation innovation has also helped to boost the G2P market. Technological advancements in these areas have reduced the risk and capital expenditure needed to deliver G2P projects. Project participants can use Floating Storage and Regasification Units (FSRUs) — which can be constructed off-site — to regasify LNG. This can provide a cheaper, more efficient solution for remote areas in which onshore construction may be challenging. FSRUs also allow gas to be delivered to areas without the need for transnational pipelines.

What Next for G2P?

The outlook for G2P looks bright. Many sponsors including oil & gas companies, power developers, FSRU owners and traders have announced their intention to actively pursue many G2P projects around the world.  Equally many governments have announced planned programmes to encourage the development of G2P in their countries. The combination of soaring energy demand, lower gas prices, new technology, and cost-effective delivery will no doubt facilitate this new wave of G2P projects in the years to come.