The future of natural gas in the clean energy transition

As the lifespan of Colombia's proven natural gas reserves has fallen to around six years amid a perfect storm of dwindling exploration and surging demand, urgent action on several fronts is needed to avoid a looming deficit and help advance the energy transition.

To learn more about the state of the sector and potential solutions, BNamericas talks with Luz Stella Murgas, the head of natural gas association Naturgas, who is also preparing a bid for the presidency of the International Gas Union (IGU).

This is the first of a two-part interview. The second part will be published in the coming days.

BNamericas: Do the challenges facing the natural gas sector in Colombia reflect the main challenges at the global level?

Murgas: Natural gas proved to be a versatile resource, which is capable, perhaps, of overcoming the worst energy crisis we have seen in the last 50 years.

That is why we will continue to connect supply with demand to maintain energy security. But the truth is that this is a conscious industry. And that means that we also prioritize environmental and social objectives, and I believe that we need to be much stronger in communication, much stronger in the consolidation of data that demonstrates the awareness the natural gas industry has at a global level.

And perhaps that will allow us to leave the polarization the world is in behind. Different regions may have different needs, opportunities and challenges. It's like that for continents, too.

However, we're in a world that is increasingly polarized and natural gas must emerge from this polarized discussion because, without a doubt, that is key to being able to face these great global challenges.

But it doesn't stop with differences. There are countries that have natural resources and others that don't, and there are continents that are much more aggressively leading an energy transition process, while others are a little behind. There are continents where energy poverty is even more noticeable and visible, while in others it is not.

And that also, of course, merits that we can build a higher purpose, which is closely tied to the fulfillment of these social and environmental commitments, but also that we promote public policy and the investment that is necessary to face those specific challenges that each one has.

BNamericas: You previously mentioned that Colombia needs to invest in exploration because reserves have fallen to 6.1 years. Is the decrease in investments in gas exploration a global problem and is it more acute in Colombia?

Murgas: Colombia's current position, without a doubt, warrants a reaction and urgent decisions to really increase exploratory activity and expedite the development of current projects or those that have resources to guarantee supply, access and energy security. It is also important to develop this potential to be self-sufficient and maintain reliability in the provision of service to 36 million Colombians who benefit from natural gas.

And from that perspective, at Naturgas, in a very proactive and constructive spirit, we have worked in an articulate manner with the government, but we have been very proactive in proposing measures that allow us to increase exploratory activity to incorporate reserves, and also regulatory measures that guarantee supply for the following years.

We're constantly working with the government, providing the necessary input so that these measures are considered and adopted as soon as possible.

BNamericas: How is that different from the global situation in the exploration segment?

Murgas: The situation in the world varies depending on the continent. South America is showing that it has great reserve potential with the development of Vaca Muerta in Argentina, which is in the development stage.

It is also happening offshore Brazil and in the Caribbean, as well as with the discoveries in Colombia, and in Trinidad and Tobago, Suriname and Guyana.

With this, the Caribbean is becoming a new energy hub. When we add this potential of South America and the Caribbean to the developments in North America, Canada and the United States, it is of course key to conclude that the American continent is going to be a key player and will play a role as a supplier of natural gas to cover growing markets in Asia, especially in India and China in the coming years.

But the truth is also that the Middle East plays part of that key role as supplier, to guarantee supply to European and Asian countries. Middle Eastern countries are taking advantage of resources from natural gas exports to invest in renewable energy projects. And Europe is much more focused, in addition to guaranteeing energy security, on developing biogas and biomethane projects as an alternative for the decarbonization of the industrial sector and the transport sector.

They are also betting on hydrogen as one of the gases that in the future, as long as we manage to close the financial and financing cost gap, will play an important role in the European energy matrix.

China continues with an aggressive decarbonization plan even though it is a natural gas importer. It is trying to replace the use of coal with gas in the industry. Due to the population issue, India and China have quite high growth indicators that will imply that there will be greater energy consumption and the greater consumption will be concentrated in cleaner energies such as gas and in renewable energies and gases.

BNamericas: Do you see more possibilities in Latin America for green hydrogen to be developed or should the region focus on blue hydrogen, using its natural gas resources?

Murgas: I believe that the true energy transition is to take advantage of the natural resources we have to quickly provide backup for energy and the growing supply of renewable energy. Regarding hydrogen, regardless of color and origin, the main bottleneck is in the cost of production, less for blue hydrogen than green hydrogen.

This is a real challenge in Colombia and the world. We have tried to see how other countries, through subsidies, have tried to close that financial gap so that projects advance, but perhaps a subsidy will not be the only thing that will keep the hydrogen industry and market sustainable over time.

BNamericas: What does Colombia need to leverage the hydrogen sector?

Murgas: In Colombia, in particular, we first need wind and solar projects to be able to grow their energy generation for electric power consumption. But at some point they will also be essential where there is greater potential and in the area where there is greater potential to produce green hydrogen.

However, I insist, the cost is perhaps the main challenge. Colombia's natural gas potential would allow us also to produce blue hydrogen and what is taking place at the Barrancabermeja and Cartagena refineries would allow us to also produce gray hydrogen.

But financial closure there is a bit tight and great efforts must be made to be able to add demands that allow hydrogen production projects to be viable. The same thing is happening in Europe. The cost is very high.

BNamericas: What is the path to overcome the cost challenge?

Murgas: There is some type of demand that is beginning to assume these hydrogen costs, especially in countries that have other resources, but Europeans are very focused on developing biogas and biomethane projects, which is taking advantage of gases that are generated from biomass, to be a little more specific, gases that are generated from landfills and wastewater treatment plants.

There is also the agricultural sector, which has to do with pork, chicken and cow manure, to capture it in large-scale projects, transform it into biomethane and be able to produce electrical energy or gas for cooking, especially thinking about decarbonizing the natural gas industry or reducing poverty in remote areas without access to any energy solution.

Hydrogen is going to continue to be a very big challenge. In the meantime, we believe that in the short term, biogas and biomethane projects, within this general concept of renewable gases, can be more effective, both from the point of view of cost and demand coverage.

BNamericas: Why do you want to run for the IGU presidency?

Murgas: Naturgas has been a member of the International Gas Union for more than 10 years. Today we hold the presidency of the Strategic Communications Committee and we seek, through this position, to amplify the industry's message regarding our commitment to reducing emissions and facing the great challenge of climate change.

But we also want to show that other side of gas in terms of the social impact it has on poverty reduction, closing inequality and gender gaps, as it is about women who are the ones that are mainly cooking in the most vulnerable homes and, of course, [we want to] accelerate the energy transition by taking advantage of the low emissions of natural gas to decarbonize sectors such as transportation and industry.

It is also our purpose to encourage stopping the use of more polluting traditional fuels and move toward natural gas to accelerate the reduction of emissions from other sectors of the economy that still rely on more polluting fuels.

I believe that the results I have achieved in my management as an association leader allowed me to connect with other international organizations and share that new vision of the industry beyond profits, beyond just connecting supply with demand.