G20 Parallel Event: Exploring Short Term Solutions To The Global Gas Crisis

 G20 Parallel Event: Exploring Short Term Solutions To The Global Gas Crisis

The Directorate General of Oil and Gas, Ministry of Energy and Mineral Resources in collaboration with The Economic Research Institute of ASEAN and East Asia (ERIA) held a workshop as a G20 Parallel Event entitled ‘Exploring Short-term Solutions to the Global Gas Crisis’.

The natural gas market was already under pressure before the outbreak of the Russia-Ukrainian conflict due to the lack of investment since 2015, the Covid-19 pandemic in 2020, post-Covid-19 recovery, and supply chain disruptions, especially in commodities. As a result, energy supply cannot keep up with demand. Both situations are further exacerbated by higher levels and volatility of energy prices.

After two panel sessions, the following is a list of short-term solutions to alleviate the gas crisis recommended by Hiroshi Hashimoto, Head of Gas Group, Fossil Energies & International Cooperation Unit, The Institute of Energy Economies Japan (IEEJ), as the keynote speaker in this workshop.

1. Increased production of natural gas and LNG. This is important considering that the current LNG facility is at full capacity, but a new investment in the LNG business takes about five years, from the final investment decision to production.
2. Support countries with idle capacity or pending upstream gas projects to regain capacity to produce and export gas, especially to areas where it is most in need. Regional cooperation may be one of the key factors to help certain countries get rid of potential capacity constraints that can be caused by various problems such as financial problems and domestic resilience instability.
3. Develop an emergency plan initiated by the G20 group to ‘transfer’ LNG cargo to areas with high demand but low purchasing power. It is very important to help low-income countries to get LNG cargo. Reroute LNG cargo to the region would help. On the other hand, given that gas trading is run by the private sector, compensation mechanisms or financial incentives will be needed for both gas companies and importing countries.
4. Optimizing the destination of LNG cargo by utilizing certain contract agreements. Along with changing LNG cargo routes from areas experiencing oversupply, increasing the number of available LNG cargoes could be an important step in the near future. Exporting countries must take the initiative to optimize the operation of ships and LNG terminals/ports.
5. Issue statements that can help stabilize the gas market in the short term. This kind of message that confirms the need for new gas investment is very important, given the need for policies and a business environment that allows new natural gas investments. Eliminating all fossil fuel investments, including natural gas, in order to mitigate the climate could prolong the current energy crisis and result in the erosion of healthy economic growth, which is essential for long-term mitigation efforts.
6. Initiate and intensify discussions to formulate potential short-term measures to reduce excessive price volatility. The need to avoid interventions that can create more market uncertainty and the need to respond appropriately and cooperatively to market price signals.
7. Immediately build a real-time and universally accessible information platform related to natural gas trading. The willingness of private companies to disclose various information is a key factor in building this platform. The Joint Gas Data Initiative (JODI) is a good example of doing this.