Warren R. True
Chief Technology Editor—LNG/Gas Processing
LONDON, Nov. 22 -- As unseasonably early and savage winter storms approached the UK this week, uncertainty of supply and high prices for winter fuels were chief concerns of Europe's natural gas industry leaders as they opened the 20th annual European Autumn Gas Conference in London.
A single fully integrated, fully deregulated European marketplace was the answer, according to keynote speakers, but several saw difficulties from consumer discontent over high prices, a consequent push by governments to intrude into the market and make matters worse, and the growing global trade in natural gas.
UK perspective
UK Minister of Energy Malcolm Wicks said he sees two challenges for his country: its increasing dependence on imported supplies of natural gas for the next 20 years and the competition for supplies in a global gas market.
Wicks decried the lack of market reform among the rest of the European Union's 25 members, saying consequent distortions have consumers "paying more than they need to." The European Commission recently issued a strong warning to EU members to accelerate deregulation of electricity and gas markets (OGJ, Nov. 21, 2005, Newsletter).
Wicks pointed to plans for Shtokman gas-condensate field as evidence of the kinds of supply issues facing both the UK and Europe: Once considered for European markets, gas from the giant Barents Sea field is now targeted for US markets as LNG (OGJ, Oct. 3, 2005, Newsletter).
As did subsequent keynote speakers, Wicks pointed to the emergence of China's gas market as another example of the competition Europe faces.
In the UK, he said, progress had been made with liberalization directives in 1998 and 2003, but it has been "painfully slow." The UK government will be taking a "close, hard look" at competing fuels that have historically enjoyed governmental protection: nuclear energy, coal, and renewables.
Asked whether Europe could or should support stronger links between itself and Iran, especially in the form of larger gas imports via pipeline, Wicks noted the difficulties caused by the current political regime there but added generally that the regions need to move toward "greater integration of nations."
Future of gas
In her keynote remarks, BP PLC's Vivienne Cox, group executive vice-president for gas, power, and renewables and manager of the company's gas trading arm, began by offering the industry a question: "Can we trust gas markets and market demand?"
It is a question, she said, that consumers are asking, adding "Is gas to be the fuel of the future?"
And Cox noted that price concerns in the US are skewing decisions about energy supply. In China as well, despite the huge potential market, gas faces intense competition from nuclear power and coal. "Will gas be given the time to develop the needed infrastructure?" she asked, noting the disadvantage of the fuel in a developing country like China.
As the UK makes the transition to imported natural gas, said BG Europe's Mark Carne, prices should begin to moderate.
Noting the growing global market for LNG, Carne said, "Commoditization of natural gas is an opportunity for the UK, not a threat." It will allow traders to "shop around."
Further supporting his belief that LNG will become a globally traded commodity, he showed graphically the estimated growth in LNG spot cargoes and the growth in cargo diversions, especially to Spain and Asia. By 2007, he estimated, LNG spot cargoes will grow to nearly 20 million tonnes/year from about 11 million tonnes/year in 2004.
For the UK continental shelf, Carne expressed concern that the "supermajors" are producing more and exploring less and said he believes exploration "players" should be encouraged by investment policies.
Contact Warren True at [email protected].
