QUESTIONS ON GROWING GAS TRADE

Prospects for rapid growth in international gas trade raise questions worthy of attention at the 18th World Gas Conference this week in Berlin.

Growth itself isn't in question. Environmental concerns will increase worldwide demand for natural gas. Supplies relative to anticipated demand will remain adequate for decades at least. Technology will improve the fuel's consumption efficiencies in applications where it does not yet compete. Consumers and producers will have growing incentive to trade internationally.

It all makes future growth in international gas trade one of the safest bets in the energy business. Royal Dutch/Shell Group expects internationally traded gas to account for 21 % of worldwide sales of the fuel by 2010, compared with 14% last year. As a two part Oil & Gas Journal special report ending this week shows, there's no shortage of projects under way, planned, or envisioned to support the surge.

LIKELY TRADE PATTERNS

Traditionally strong European markets soon will be joined by formerly Communist European countries needing new volumes of gas for economic and environmental reasons. There are questions about the Soviet Union's ability to sustain gas exports to Europe at recent, world-leading levels. So the region offers new or expanded opportunities to countries such as Algeria, Libya, Nigeria, and Iran.

Demand for imported gas will continue to grow in Asia's economic hard-chargers-Japan, Taiwan, South Korea, Thailand, and Singapore. India needs more gas, too. Malaysia, Indonesia, and Abu Dhabi will remain the major suppliers, soon to be joined by Qatar. Other possible suppliers include Myanmar, Viet Nam, and Iran.

The U.S. will import increasing volumes of gas beyond its burgeoning Canadian pipeline supplies and relatively small liquefied natural gas trade with Algeria. Venezuela plans an LNG project to serve the U.S. Several Eastern Hemisphere projects also will seek business there. Argentina wants to become a significant gas exporter to Latin America, the U.S., and elsewhere. For its part, the U.S. might someday make the statutory adjustments necessary to begin LNG trade with Asia based on Alaskan natural gas.

KEY QUESTIONS

Other projects and opportunities exist. Others will emerge. Some current and future plans never will materialize. But activity will be intense. That's why industry leaders should start seeking answers to a few key questions now:

How will industry ensure safety as more LNG liquefaction and gasification plants appear near busy ports and as more cryogenic tankers, representing more owners and charterers, take to the seas? The industry has a spotless safety record. But risks will multiply as the industry becomes more active and diverse. Now is the time to determine how to keep them under control.
How will the industry's expansion be financed? Shell expects the surge in international gas trade to require investments totaling $600-800 billion in the next 20 years, including $60 billion for LNG projects. Much of the work will occur in developing countries now overburdened with international debt.
What business and legal standards can industry implement to address commercial concerns such as supply and market security, contract flexibility, and price fairness? Market growth for internationally traded gas depends on growth in producer and consumer confidence that the business itself works.

In the the next two decades, international gas trade should develop into one of the world's great businesses. The challenge of the moment, the challenge to gatherings such as the World Gas Conference, is to ensure that nothing preventable stands in the way.