IHS CERAWeek: Shale gas gives US competitive advantages

The US holds ample reserves of natural gas to help supply rising world gas demand, particularly for gas-fired electric power generation in Asia, speakers told the IHS CERAWeek energy conference during the Mar. 5 opening gas keynote speech and the global gas plenary.

“It’s clear that no country has found greater opportunity in recent years than the United States,” said Joe Kaeser, Siemans AG president and chief executive officer. “The US will most likely become the world’s largest oil and gas producer this year. That’s affordability, availability, and sustainability all in one.”

An abundance of shale gas has reshaped advantages that the US can offer the global economy, he said.

“I believe we are witnessing, and participating in, the reindustrialization of the United States,” Kaeser said during the opening keynote speech. “And I think it’s fair to say that the development of horizontal drilling may have been the biggest shift of balance in the global economy since China jointed the World Trade Organization.”

He advocated US LNG exports, saying the US stands to really benefit although many decisions have yet to be made in policy and regulations.

“You have the knowledge, and you have the right people in the field of digitalization to drive this transformation of your industry landscape,” Kaeser said. “And that’s why companies invest here.”

Gas demand forecast

Rob Franklin, president of ExxonMobil Gas & Power Marketing Co., said world gas demand is expected to rise dramatically by 2040. Much of that demand is expected to stem from gas replacing coal for power generation.

ExxonMobil sees North America gas demand rising 1%/year on average and flattening toward 2040 while European gas demand remains relatively flat. Meanwhile, ExxonMobil’s forecast calls for gas demand in Asian Pacific to nearly double by 2025.

Gas is a key component for Europe’s ability to build a competitive economy yet its climate policies have distorted energy markets, Franklin said.

“There has been a dramatic rise in coal use across Europe,” while the use of gas for power generation has declined, he said. Renewable energy subsidiaries and greenhouse gas targets could undermine competitiveness in Europe, he said.

“It is imperative that all energy sources be allowed to compete,” Franklin said.

Regarding the Asia Pacific, Franklin said massive LNG supplies will be needed to meet future demand.

“LNG supply will remain a capital-intensive business,” he said, adding that consumers must realize that industry’s costs continue to rise.

Sam Laidlaw, Centrica PLC chief executive, said the future of European gas demand will demand largely on the European power market.

“The consensus over energy policy has broken down,” Laidlaw said. “Renewables are proving to be much more expensive than previously thought.” He used offshore wind power as an example.

“Political uncertainty is the enemy of energy investment,” he said. “It’s vital that we don’t forget about security of supply…. I think events in Ukraine over the last few days have given us a sharp reminder.”

Chris Finlayson, BG Group chief executive officer, also believes LNG will play a critical role in fulfilling global energy demand.

“There is a strong consensus the LNG trade will continue to show strong growth,” he said, adding, “The US will clearly play a role in this.”

Finlayson sees the global LNG trade becoming more flexible and Asian consumers want diversity in supply. Looking out to 2025, BG sees continuing gas supply constraints, particularly for Asia.

“I think cost is a tremendous challenge going forward,” Finlayson said. “I think people are now beginning to understand that there is no cheap LNG.”

Contact Paula Dittrick at paulad@ogjonline.com.

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