Jim Stott
Special Correspondent-Calgary
CALGARY, June 9 -- LNG will be well-positioned to meet some of a projected natural gas supply deficit in the US, says a senior Shell International Gas Ltd. executive.
Ann Pickard, director, Shell global LNG and power, spoke on the gas outlook to a Canadian Energy Research Institute conference near Calgary Tuesday.
Another speaker at the CERI conference, David Hughes of the Geological Survey of Canada, said LNG is already factored into supply forecasts, but it will require a tripling of world LNG capacity, including new terminals and 212 new, 3 bcf capacity tankers.
Critical role
Pickard said the day of gas is coming in North America and the rest of the world, and LNG will play a critical role. She said a lot of LNG projects will prove to be "pipe dreams," but many projects will and are proceeding.
She noted Shell is going forward with a number of LNG projects, including new terminals in Nigeria, Malaysia, Spain, China, and Mexico over the next several years.
Pickard said there are 32 active proposals and more being discussed around the world but not all will go ahead.
"Companies that can provide tailored solutions for customers will be the ones that will go ahead in the future. The key will be flexibility and the ability to respond to customer needs," she said.
The Shell executive estimated that $80 billion US in capital spending will be needed for LNG development in the next decade.
Pickard said global gas demand is expected to double by 2050, and globally there is no shortage with world gas reserves sufficient for 60 years and more gas to be discovered.
She predicted a global gas market will emerge. There will also be a limited LNG spot market with a mix of contract types and a role for strong aggregate partners.
Pickard noted there are high capital costs and a number of risks involved in the LNG business. These include permitting uncertainties, basic investment risks, and constraints on local pipeline projects.
Politics, public opinion, and technology development will all be important to LNG development. One of the most serious problems, she said, is the NIMBY (not in my backyard factor) in which fierce local opposition has killed several US projects. Possible solutions, she said, are going offshore and expanding existing terminals.
North American gas outlook
Hughes also saw the NIMBY factor as a major obstacle.
He noted that in North America natural gas was the fastest-growing fuel source during 1965-2002 and is expected to continue in that position.
He said that world booked natural gas reserves are nearly 6,000 tcf, but North America has only 5% of that total. Canada, he said, now supplies about 15% of US gas requirements, but there are likely to be serious supply shortfalls in Canada, and it is unlikely to be able to fill the North American supply gap.
Hughes said Canada and the US are on the same treadmill in which increased drilling has failed to stem declines in deliverability and reserves. North America, he said, now has just under 10 years of remaining gas reserves.
However, Hughes said, Canada´s National Energy Board is bullish on the potential for coalbed methane (CBM) and estimates it could provide 23% of Canada's gas production by 2025. Currently, Canadian CBM development is in its initial stages, and production is 50 MMcfd.
Hughes said Canadian gas reserves peaked in 2001 and in 2003 fell by 3% from 2002 levels, despite record drilling activity.
