By Kate Thomas
OGJ Online

HOUSTON, Feb. 14, 2001—Driven by power generation, gas is the key beneficiary of a shift in global energy demand away from oil and coal, says Bernard de Combret, president of TotalFinaElf SA’s gas and power trading unit.

But de Combret said oil should not be discounted as a fuel safety valve when gas demand becomes overheated, especially in the U.S., where gas supplies are increasingly tight.

Speaking at the Cambridge Energy Research Associates (CERA) conference, de Combret noted combined cycle gas turbines are well suited to distributed generation, electrification of developing markets, and account for nearly all new gas-fired power plant investment

Most new combined cycle plants in the U.S. and elsewhere are designed for dual-firing of natural gas and middle distillates, making them a vital tool in creating arbitrage opportunities, de Combret said. With deregulation industrial sites will have the ability to arbitrage energy choices between gas and oil as well as between heat and power markets, he said.

Such flexibility will be key in the future, he said, in an increasingly tight market. Mature gas markets function best when they are deregulated, but deregulation cannot overcome the limits of imbalanced markets resulting from a shortfall of storage, production, or a surge in demand tensions caused by climatic extremes, de Combret said.

“In the absence of a governmental strategic gas reserve, deregulated gas markets need a large share of interruptible consumers who can safely switch to alternative products—primarily oil products,” said de Combret.

The U.S., he said, has too few interruptible gas customers. Stiff environmental rules have limited the degree of switching between gas and heavy fuel oil in boilers. De Combret suggested the ability to switch to middle distillates in a tight market might not be enough flexibility.

As Europe deregulates, de Combret said, TotalFinaElf is seeing a clear north-south gas axis developing, combining Algeria and Norway, with the “fast-growing” Iberian gas markets. With more than 570 billion cu m of gas reserves, equivalent to 17 years of current production, and LNG plants in Nigeria, Qatar, the United Arab Emirates, Oman, and Indonesia, TotalFinaElf is a major market player.

“We believe trading will develop around a southern European-Pyrenees gas hub that will complement current activity at Bacton and Zeebruge in Northwest Europe,” he said.

The company covers 10% of the industrial gas and commercial markets in the UK.