MEGL: Worldwide gas, LNG projects set stage to surpass oil in energy-equivalent consumption

Bob Tippee
Editor

DUBAI, Sept. 10 -- With global demand growing faster for natural gas than for oil, trade in LNG might quintuple in size during the next 3 decades.

Charles Watson, Shell Gas & Power director, Middle East, Africa, and South Asia, made that forecast Wednesday at the Middle East Gas & LNG Forum here.

Also at the forum, held in conjunction with the Middle East Petroleum & Gas Conference, industry and government officials updated active but diverse gas programs under way in Saudi Arabia, Egypt, India, and Iran.

Watson said gas will overtake oil in energy-equivalent consumption as early as 2025. As internationally traded gas gains share of the total market, demand for LNG might reach 500 million tonnes/year in 2030.

Although gas use will grow rapidly in China and India, traditional markets in Europe, Asia, and North America will account for nearly 60% of gas demand growth in the next 20 years, Watson said.

The Shell executive estimated that LNG exports from the Middle East will climb to 40 million tonnes/year in 2006 from 25 million tonnes/year in 2003. Gas-to-liquids projects, he said, "will complement the region's established position in LNG." He cited GTL projects proposed in Qatar and Iran.

Saudi gas program
Unlike other major holders of gas reserves, Saudi Arabia has rejected LNG in favor of a program that Ali Al-Ajmi, Saudi Aramco vice-president, Southern Gas Area operations, as "deriving highest value with domestic use."

The kingdom has displaced exportable oil in domestic uses for power generation, water desalination, and industrial fuel and become a major exporter of gas-based products such as methanol, methyl tertiary butyl ether, ammonia-urea, natural gas liquids, and olefins and their derivatives.

Continuing to expand the Master Gas System, which came on stream in 1980, it started up a gas processing plant in 2001 at Hawiyah—Saudi Arabia's first plant to be fed only nonassociated gas—and is bringing processing plant on stream at Haradh.

Also based on nonassociated gas, Haradh brings total Saudi gas-processing capacity to 9 bscfd. And design work is under way for an 800 MMscfd expansion of the Hawiyah plant, due on stream in 2007. That project and debottlenecking of existing plants will raise total processing capacity to 10 bscfd.

Al-Ajmi estimated Saudi production of NGLs this year at 750,000 b/d, of which 410,000 b/d is used domestically, mainly as petrochemical feedstock. The rest is exported.

Al-Ajmi said Saudi Arabia's reserves of nonassociated gas have doubled during the past 6 years to 92 tcf. With associated volumes, gas reserves total 231 tcf.

LNG plans in Egypt, India, Qatar
In Egypt, construction has begun at Idku, 30 miles east of Alexandria, of the first train of an LNG liquefaction plant scheduled to start production in the second quarter of 2005. Capacity is 3.6 million tonnes/year of LNG, which Gaz de France will buy.

Arshad Sufi, director of BG Egypt SA, one of the project partners, said a second train, also with capacity of 3.6 million tonnes/year, is being planned for possible start-up in mid-2006. Production would supply BG Group's LNG terminal at Lake Charles, La, until a regasification facility is finished at Brindisi, Italy.

Other project partners are Petronas—the other half-interest partner with BG Egypt in the deepwater fields that will feed the LNG scheme—Egyptian General Petroleum Corp., and Egyptian Gas.

Sufi said the third of six possible liquefaction trains is "under investigation."

Suresh Mathur, CEO and managing director of Petronet LNG Ltd., New Delhi, said the 5 million tonne/year LNG receiving terminal under construction at Dahej, Gujarat, will start up as India's first LNG import project in December.

RasGas Co. Ltd., which owns a 10% interest in Petronet, is building a 4.7 million tonne/year liquefaction train at its Ras Laffan, Qatar, complex to supply the LNG. The first of two LNG carriers dedicated to the project is due for delivery from the Daewoo shipyard in South Korea in December.

Gas from the LNG scheme will displace 6 million tonnes/year of naphtha and distillate oil in fertilizer and power plants and supply other markets, including compressed natural gas required in public vehicles in Delhi and Mumbai. A possible expansion of the Dahej terminal would push capacity to 10 million tonnes/year.

Also in India, Shell plans an LNG receiving terminal at Hazira.

Iran lacking buyer commitments
Iran plans to export LNG but so far lacks commitments from buyers.

Mohammad Souri, chairman and managing director of National Iranian Tanker Co., said his country could be exporting 8 million tonnes/year of LNG by 2007 and 32 million tonnes/year by 2018 if sales agreements are secured.

National Iranian Oil Co. and partners have based the eleventh through fourteenth phases of development of offshore supergiant South Pars gas field on LNG.

Souri estimated reserves in the structure, which extends into Qatar as North field, at 960 tcf, of which 460 tcf lies in Iranian waters.

The city of Assaluyeh, about 60 miles from the field, anchors construction of plants based on South Pars production. A GTL plant is planned there.

NIOC hopes to build an 8 million tonne/year liquefaction plant for each of the four development phases. Souri estimated vessel needs for all four phases at 33 ships. Target LNG markets are Japan, South Korea, China, India, and Taiwan.

In addition to the LNG projects, Iran has export pipeline projects in various stages of planning to Turkey, Armenia, Azerbaijan's Nakhechevan enclave, India, Kuwait, and Europe.

Contact Bob Tippee at Bobt@ogjonline.com.

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