Speakers on the first day of the 24th World Gas Conference in Buenos Aires consistently noted developments in the past 3 years few had anticipated at the last event in 2006.
The most obvious certainly has been the 2008-09 global financial crisis, immediately depressing energy demand with the worst contraction of business activity since the 1930s.
The two major forces in the evolution of natural gas trade in the past 3 years have been a decisive transformation to a global gas trade and development of North America's unconventional gas supply.
Expanding gas trade, pushed by the growth of LNG production and proliferation of LNG regasification terminals, has moved the gas industry closer to its dream of breaking out of regional geographic restrictions.
Combined with the growth in LNG supply, however, has come the unexpected resurgence of gas supply in North America from unconventional sources. This surge in volume coupled with depressed demand due to the recession prompted some speakers here to forecast a time in the not-too-distant future when North America becomes self-sufficient in gas supply and joins the world's LNG exporting nations.
Gas demand growth
In his opening keynote address, Antonio Brufau, Repsol chairman and chief executive officer, addressed the competition for markets between gas and coal. He said gas demand will increase "more than what was expected, to the detriment of coal [demand for which] will recede."
Brufau was one of several speakers who cited coal's problem with carbon capture and sequestration (CCS) "plagued with unproven large-scale technologies."
Echoing his viewpoint later was the International Energy Agency's Ian Cronshaw. Contrary to his and others' projections, he said, gas demand during the current recession has increased, not lost ground, in competition with coal.
CCS, on which coal depends for it to compete in current and future environmentally conscious marketplaces, is "at minimum 10 years away," said Cronshaw.
J. Mark Robinson, formerly a commissioner with the US Federal Energy Regulatory Commission and currently president of JMR Energy Infra LLC, also said coal depends on CCS, and CCS depends on the capacity of industry to build dedicated pipelines for carbon dioxide, something he calls an "asphyxia," for which political concerns will likely preclude siting permits.
Nuclear power, said Robinson, is also problematic because final project costs cannot adequately be estimated at the first of the project.
Renewables, yet another competitor with gas, require land and transmission lines. Again, said Robinson, the public does not want large areas of empty land used as sites for wind or solar facilities nor does it want an extensive growth in electricity transmission lines.
Brufau said, independent of whatever energy policies are implemented, the "weight of primary gas consumption will be stable or grow," adding, "This viewpoint is based on one of the historically most stable long-term patterns: the ratio between gas consumption and per-capita income is stable or upward with the economic growth of countries."
Brufau also noted that countries expected to have rapid economic growth are emerging countries with low and medium per-capita income, "representing two thirds of the world's population.
"If we believe in the economic growth of these countries, then we must believe in the growth of gas demand. If we expect China and India to continue the patterns of per-capita gas consumption seen in other more advanced countries we should bet on steady gas demand."
The sector accounting for the largest gas demand growth has been and will continue to be electricity. He cited the fact that about 1.5 billion people lack access to electricity and that urbanization in emerging countries "goes hand-in-hand with electricity consumption," implying that consumption would increase.
Growing trade
Several keynote speakers and panelists on the first day of the triennial conference noted the rapid growth in global gas trading. This growth threatens to allow gas to break out of the historical regional constrictions on its trade.
Brufau called attention to the "historical pattern in the industry that is the growing weight of the international gas trade and the increasing share of LNG in it." And he said this pattern will be "projected into the future."
The reasons for it are well-known: Conventional reserves exist for more than 60 years and the geographical distribution of reserves among the main global regions implies that "future regional interdependence and international gas trade will both increase."
Brufau said, "In this context of globalization, …recent developments will favor a bias towards geopolitical considerations and towards policies geared to ensuring the security of supply."
More than one speaker or panelist called attention to the other significant event in the last 3 years: the growth of supplies in North America for unconventional gas developments.
Robinson noted how estimates of gas reserves in the Marcellus shale alone have increased by orders of magnitude; we "don't know how much gas is really in the shale," he said.
The "real question," according to Robinson, is whether the US will join the group of gas-exporting countries in the near future.
Brufau said unconventional gas, as shown in North America, "is a new variable" that will have to be taken into account for any long-term view.
"From now on we will have to bear in mind the relative cost of developing unconventional gas and the fact that unconventional gas production responds very rapidly to changing demand and price conditions," he said.
Will any of the large LNG producers restrict their production in response to markets, such as the US, where prices are soft and supply is ample? That question was addressed by another keynote speaker, Qatargas Chief Executive Officer and Chairman Faisal al-Suwaidi.
"I doubt that will happen," al-Suwaidi said, noting that overall, LNG demand is growing. "Prices in some markets, especially the mature ones, may be down but [natural gas demand] in the newer markets, especially China and India will balance the more mature markets, especially the US," he said.
With its large trains and vessels, Qatargas is in LNG trade for the long term, he said; LNG is "a long-term business," adding, "People in this business shouldn't watch the prices daily. Over the next several years, prices will fluctuate."
Noting that both Qatargas and RasGas remain under a LNG production capacity ceiling of 77 million tones/year, Suwaidi nonetheless believes each of the 6 megatrains (at 7.8 million tpy/train) could "easily be increased" by 2 million tpy after Qatar Petroleum lifts its moratorium on new gas production from North field and, thereby, its restriction on the two LNG companies.
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