European carbon-pricing initiative to benefit Qatar

By Pratap John/Chief Business Reporter

The UK’s initiative to put a firm floor for carbon pricing by 2015 will benefit Qatar, which is a clean gas producer, said KPMG Global Head (Oil & Gas) Michiel Soeting.

According to Soeting, this is the first such initiative in Europe and likely to be followed by other European countries in view of their commitments to reduce the carbon footprint.

“Europe has set a target to reduce its carbon emissions by 20% by 2020,” Soeting said in an interview with Gulf Times.

Once the firm floor for carbon pricing has been set, Soeting said most coal-fired plants in Europe, older ones particularly, will have to be shut as they are highly polluting in nature.

“These plants will not then become commercially viable as they need to pay too much for carbon emission,” pointed out the London-based Soeting, who has long experience with audit and advisory for large, international oil and gas companies.

Currently, a significant amount of cheap coal is getting into Europe from the US. North American coal is increasingly getting redirected to Europe as US power plants are getting switched to cheap gas.

Also, at the moment, there is not an efficient policy around carbon emissions in the continent. While environment safeguard is an issue, policies to stimulate gas or renewables will require government funding, the KPMG energy expert points out.

“It may be a while before that happens as European countries are now grappling with austerity measures,” Soeting said.

But once the commitment to reduce the carbon footprint by 2020 takes the centrestage, European countries will have to consider natural gas and ultra clean synthetic fuels, such as GTL, in their energy mix.

These help European countries achieve their targets on reducing carbon emissions over the next six to seven years.

“The gas industry will be a major gainer and with Qatar in the lead position, the country is going to benefit,” Soeting said.

Having said that the fact remains gas pricing will play a key role in determining the demand.

Currently, most gas is priced on long-term contracts based on oil prices. This will be beneficial for gas producers.

But with political pressure mounting to keep electricity prices under check due to public outcry, utilities will be forced to seek cheap energy.

In mature markets, gas prices will be closely watched as is the case with profits made by electricity companies.

Asked whether the development of shale resources, US in particular, will have an impact on clean producers such as Qatar, Soeting said: “I don’t see a short to medium term impact on Qatar.

In the long term, there will be huge needs for clean energy in view of the low carbon footprint requirements. Ultra clean fuels such as natural gas will thus figure in the global energy mix.”

It is true that the US has a “good infrastructure” to tap shale gas resources. The US protects private ownership of the resources underground and this stimulates entrepreneurship.

But, Soeting said, he did not think the US would become “completely” energy independent. “They may become less dependent on imported crude…may become less dependent on the Middle East”.