Gastech: Panelists debate market sustainability in light of shale gas development

In several senses, security governed the discussion on the opening day at Gastech in London. Executive panels through the day explored various meanings of the word and implications of the concept.

In the morning, the opening global executive panel looked at whether the worldwide gas industry and its markets had entered the “Golden Age” of gas. Its premises were markets’ increasing desire to burn a less-polluting fuel as well as prospects for huge reserves resulting from shale play developments, especially in North America.

The regional executive panels in the afternoon looked at Europe’s ongoing dilemmas in attempting to secure natural gas supplies from a variety of sources and in many forms. Another regional panel looked the role of the US and Canada in supplying gas to world markets and the extent of its influence.

On the brink

Little doubt seems to remain among suppliers and markets that natural gas stands on the brink of a new era. That’s confirmed, if it needed to be, by the expansion of gas reserves in North America and prospects for the technologies behind it being applied in several other global regions.

What is perhaps in doubt, according to morning panelist Tokyo Gas Ltd.’s Shigeru Miraki, is how LNG exports from North America will be priced and whether oil-indexed pricing will continue in Asian markets. “Oil-indexed pricing is no longer rational,” he said, sounding a common theme throughout the day that oil indexation is (or should be) seeing its last days as a global pricing mechanism.

If the US gas price to Japan is $9-10/Mcf of gas equivalent, said Miraki, Japanese demand will reach 90-100 million tonnes/year (tpy) sooner rather than later. So long as the country’s gas market is governed by oil indexation, however, the price will be higher and demand therefore lower.

Underscoring the perception of natural gas as a greener fuel, RasGas Co. Ltd.’s Khalid Sultan Al-Kuwari said gas is not only a bridge but also a “highway to a greener future.” In response to a question about the effect of growing Australia LNG export capacity, he said Qatar is a “reliable but also a flexible supplier.”

So where does that leave traditional suppliers? Sonatrach’s Djeloul Bachi-Bensaad said the state company, once the world’s largest exporter of LNG, is investing $70 billion over 5 years—70% of which towards upstream development—to ensure supply to Europe remains reliable.

Supply security

The thorny question of European supply and demand—in a liberalized yet securely supplied marketplace—was addressed in another session.

There, BG Group’s Chris Finlayson said European markets aspire to supply diversity and market liberalization but are unwilling to make a commitment to ensure either.

RWE Supply & Trading’s Stefan Judisch said Continental Europe, as exemplified by Germany, is “inflicted” by renewables because, he said, subsidies for solar-generated energy skew demand vs. gas-fired electricity generation.

“Oil is a global commodity, he said; “gas is a regional one…. Price integration must reflect the dynamics of supply and demand for gas not for oil.”

Finlayson said that, in Europe, there is one certainty: Regional gas production will continue to fall. Therefore, imports via pipeline from Russia and Norway and via LNG will fill the demand.

Alexander V. Novak, Russian Federation’s minister of energy, said that Russia is more than willing to be a long-term supplier. But, he sees the need for more level playing field between European Union and non-EU countries.

US LNG

Richard F. Guerrant, ExxonMobil Corp. vice-president for LNG, ExxonMobil Gas & Power Marketing, said what’s happened in the US ensures “about 100 years equivalent of gas supply.”

But governments must “adopt wise energy policies and embrace free markets and free-trade principles and understand the sanctity of contracts.”

He also said, “free-market solutions, understood by government, are the keys to a successful project.”

Cherif Souki, chairman and chief executive officer of Cheniere Energy, whose LNG export project is the first and only one so far to be under construction, credited the regulatory environment in the US regulatory environment for the company’s success in reaching that milestone.

Elizabeth Spomer, BG Group’s senior vice-president for business development, pointed out how volatile Henry Hub pricing has been for the last 15 years; “Pricing out a 20-year contract, based on the last 15 years of HH, is not really for the faint of heart.”

She believes, when the US export-project proposal frenzy settles, exports will be limited to about 45 million tpy by project stakeholders and by markets; “this is lean gas, not all Asian buyers can take it.”

The global market, especially Asian demand by 2020, is going to need other supply sources.

Contact Warren R. True at warrent@ogjonline.com.

Related Articles

Shell cuts $15 billion in spending for 2015-17

01/30/2015 Royal Dutch Shell PLC has curtailed more than $15 billion in potential spending over the next 3 years, but is not “not overreacting to current low ...

Victoria extends drilling, fracing ban

01/30/2015 The new Victorian Labor government of premier Daniel Andrews has extended the coal seam gas (CSG) exploration and hydraulic fracturing ban in the s...

Chevron’s $35 billion capital budget down 13% from last year

01/30/2015 Chevron Corp. will allocate $35 billion in its capital and exploratory investment program for 2015, including $4 billion of planned expenditures by...

US Senate passes bill approving Keystone XL pipeline project

01/30/2015 The US Senate has passed a bill approving construction of the proposed Keystone XL crude oil pipeline by a 62-36 vote after 3 weeks of debate. Nine...

Oxy cuts capital budget by a third

01/30/2015 In the midst of falling oil prices, Occidental Petroleum Corp., Houston, expects to reduce its total capital spending for 2015 to $5.8 billion from...

MARKET WATCH: NYMEX natural gas prices drop after storage report

01/30/2015 US natural gas closed at its lowest price in more than 2 years on the New York market Jan. 29 following the government’s weekly gas storage report,...

Pennsylvania governor reinstates state forest drilling moratorium

01/29/2015 Pennsylvania Gov. Tom Wolf (D) signed an executive order fully reinstating a 2010 moratorium on new oil and gas leases in state forests and parks. ...

PwC: Low oil prices might drive surge in restructuring in 2015

01/29/2015 Mergers and acquisitions (M&A) in the oil and gas industry hit 10-year highs in terms of deal value and volume in 2014, according to a report f...

DOE could meet 45-day LNG export decision deadline, Senate panel told

01/29/2015 The US Department of Energy would have no trouble meeting a 45-day deadline to reach a national interest determination for proposed LNG export faci...
White Papers

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...
Available Webcasts


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

When Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST



On Demand

Prevention, Detection and Mitigation of pipeline leaks in the modern world

Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST


Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected