As the price of natural gas soared, the CEO explained the last word behind the energy transition

CEO of Energy Technology Company Baker Hughes He outlines the key points that he believes are related to the energy transition, as people are increasingly worried about rising natural gas prices and the possible chain reaction in the coming months.

Earlier this week, at the Gastech conference in Dubai, United Arab Emirates, Lorenzo Simonelli was asked in an interview with CNBC’s Dan Murphy if it is possible for a surge in oil prices Is it temporary, or does he expect to have a broader impact on consumers, the market, and the wider economy.

“I think a lot of people have seen what is happening in Europe, and it reveals important discussions around the energy transition and our importance to natural gas,” he said.

He said that it is too early to judge whether prices will remain high or whether such increases are temporary.

According to a Reuters report this week, benchmark European natural gas prices have risen by more than 250% since the beginning of this year.

There are many reasons for spikes. The influential but generally conservative International Energy Agency said on Tuesday that the surge in European natural gas prices was “driven by a strong recovery in demand and a tighter supply than expected, as well as a number of weather-related factors.”

“These include the particularly cold and long heating season in Europe last winter, and the supply of wind energy in recent weeks has been lower than usual,” it said.

IEA executive director Fatih Birol said that considering the many reasons behind the price increase, it is “inaccurate and misleading” to put responsibility at the door of the clean energy transition.

Birol’s statement seems to be in contrast with the views expressed by OPEC Secretary-General Mohamed Barkindo and others. Barkindo told CNBC on Tuesday The soaring natural gas price is the cost of trying to switch to renewable energy.

“I talked about a new premium that has emerged in the energy market, which I call a transition premium,” Barkindo said.

The impact of rising natural gas prices has been felt on the ground. For example, in the UK, it caused many small energy suppliers to go bankrupt.

“We need energy security,” said Simonelli of Baker Hughes. “You see, there is a lot of natural gas in the world, and there is a lot of energy available,” he added. “It’s a matter of bringing it to the market.”

Regarding the energy transition — the term refers to the shift from fossil fuel-based energy sources to energy sources such as solar and wind power — Simonelli tried to highlight some of the issues that he considers important.

“We think there are three harsh facts,” he said. “First, we must work together to accelerate the pace of decarbonization and elimination of emissions.”

“Second, hydrocarbons will continue to exist… In fact, natural gas is a key element. Third, we must work together, cooperate and actually adopt the new technologies that are available.”

The burning of fossil fuels such as oil and natural gas is the main driver of climate emergencies. Although policymakers and business leaders have repeatedly promoted their commitment to a net-zero strategy, it is expected that the world’s dependence on fossil fuels will become more severe in the coming decades.

According to a study published by the Carbon Action Tracking Agency earlier this month, none of the world’s major economies is currently expected to control global warming within the 1.5 degrees Celsius target of the Paris Agreement. A separate study shows that most of the world’s known The underground reserves of fossil fuels must be kept in order to hopefully prevent the worst effects of climate change.

The role of natural gas

Although major economies such as the United Kingdom, the European Union, and the United States have formulated plans to get rid of fossil fuels in the next few years, the current crisis surrounding natural gas prices has enhanced its continuing significance.

In fact, the International Energy Agency stated in a statement issued on Tuesday that natural gas is still “an important tool for balancing electricity markets in many regions today.”

“As the clean energy transition moves towards net zero emissions, global natural gas demand will begin to decline, but it will still be an important part of electricity security,” the Paris-based organization added.

In an interview with CNBC, Simonelli was asked about the role of natural gas in the net-zero race. “You only need to look at Europe and the United States and see how they have successfully reduced carbon dioxide emissions over the past few decades,” he said.

“You have seen the transition from coal to natural gas, and when you look at the emissions profile, this transition will continue,” he said. “So, from an emissions perspective, you can reduce the footprint of natural gas. It is already one of the most effective fuels, and we think it will continue to exist.”

— CNBC’s Natasha Turak contributed to this report