CERA: Stage set for more global gas market

Feb. 14, 2008
The stage appears set for natural gas to become more of a global energy commodity in 2008-09 than in the past, largely because of an expanding LNG industry, CERA said at its annual conference in Houston.

Paula Dittrick
Senior Staff Writer

HOUSTON, Feb. 14 -- The stage appears set for natural gas to become more of a global energy commodity in 2008 and 2009 than in the past, largely because of an expanding LNG industry, Cambridge Energy Research Associates said at its annual conference in Houston.

"The LNG armada has already set sail," said Michael Stoppard, CERA senior director for global gas, during a Feb. 13 news conference. "In 2007, we saw the ability of the LNG market to respond to global events," he said, referring to a July 16, 2007, earthquake that caused the shutdown of a Japanese power plant and the outage of a major North Sea gas pipeline serving the UK.

Stoppard foresees LNG growth to continue to 2010 based on investment decisions made years ago. He is uncertain about LNG's pace of growth beyond 2010.

Despite the current LNG momentum, Stoppard said a need "absolutely" exists for the proposed Alaska natural gas pipeline. CERA believes an Alaska pipeline could not be put into operation until after 2020, and that LNG will help fulfill US gas demand until then.

LNG growth scenario
Stoppard expects global liquefaction capacity to increase to 341 billion cu m from today's 262 billion cu m within 24 months. This stems from investments at Qatar's Ras Laffan along with projects in Russia, Yemen, Australia, and Indonesia.

World LNG shipping capacity is expected to increase by more than 50% by 2010, he said. More LNG vessels will allow for expanded arbitrage opportunities, and it also presents the opportunity for using ships as floating regasification and storage vessels.

Meanwhile, investment in regasification terminals is rising at a faster pace than the associated liquefaction.

That is because regasification represents 10-15% of LNG supply chain costs, Stoppard said, adding that the number of regasification facilities always should exceed liquefaction facilities. Surplus regasification is essential for sellers wanting to move shipments between regions.

"For buyers, regas is the ante to sit in on the global gas procurement game," Stoppard said. "The expanding number of countries considering building LNG import facilities ranges from Brazil and the Netherlands to Pakistan and New Zealand."

Contact Paula Dittrick at [email protected].