WGC: ExxonMobil, Chevron CEOs list gas growth’s challenges

July 3, 2018
The US natural gas outlook undeniably has improved substantially in the last 30 years, the chief executives of the nation’s two biggest multinational oil companies agreed on June 26.

The US natural gas outlook undeniably has improved substantially in the last 30 years, the chief executives of the nation’s two biggest multinational oil companies agreed on June 26. But rapidly improving technology, intelligent government policies, and strong partnerships with other countries will be required to make the benefits truly global, they said as the 2018 World Gas Conference got under way in Washington, DC.

“Energy underpins modern society. It’s essential to everything we do,” ExxonMobil Corp.’s Darren W. Woods said during the WGC’s opening plenary session. “But our industry also recognizes the need to address global climate change. Through all this, natural gas has been a pillar of US economic strength. The right government policies can set the stage, but properly applied technology will make the difference.”

Chevron Corp.’s Michael C. Wirth said, “I’m confident natural gas will continue to play a key role. But if you talk to some people, they say that a transition away from it is necessary to tackle global climate change. The human race has been in an energy transition for all of history. Many forms will be needed. One won’t be dominant.”

Wirth said the three main challenges are: combating global poverty so that more of the world will have access to affordable clean-burning energy, finding the right industry and country partners, and promoting free markets so resources, technology, and ideas are directed to their most effective areas.

IHS Markit Vice-Chairman Daniel Yergin, who moderated the discussion, cited several recent trends and events that suggest that continued global gas growth is not inevitable:

• Controlling methane emissions “has been firmly planted” as a gas industry improvement topic.

• Growing international trade turbulence potentially could affect gas markets.

• US LNG exports have grown to a point that global markets have become less politicized.

• China’s problems meeting demand this past winter showed how closely connected global gas markets have become.

Woods noted that rising US gas production from tight shale formations, combined with gas’s increasing role in generating electricity, has made some stage government policy decisions appear questionable. “Two months ago, I watched a tanker unload LNG from Russia in Boston Harbor, while several proposed pipelines from domestic production areas which could bring more gas to New England can’t get the necessary state approvals,” he said.

When Yergin asked the two executives how they thought gas’s competition with coal and renewable sources will play out around the world, Wirth responded that it depends on the country. “There are some places where coal still looks appropriate. But other sources are beginning to move in,” he said.

“Economics will drive choices, and proven technologies and nation priorities will contribute,” Woods said. “But the electricity that’s produced will need to be affordable.”

Both speakers noted that LNG presents a special challenge because projects can take a long time to finance, win government approvals, and be built. “Several were under way when prices were high. We know now that we need to have enough infrastructure, a strong supply chain, and the right partners,” Wirth observed.

“If you’re in an era of scarcity, the priority is getting the product to market. If there’s abundance, it becomes necessary to keep prices low enough to stay competitive,” Woods noted.

Gas can present special problems because it’s harder to transport than crude oil, Wirth said. Long-term contracts that have been dominant are starting to give way to spot purchases, although they are still desirable to financial providers, he said.

Concern that LNG supplies will outpace demand has begun to recede, the Chevron executive said. “There’s a lot of gas waiting to be developed in the world, and a lot of companies that want to produce it,” he said.

Asked about possible adverse impacts from US President Donald Trump’s imposition of sanctions on imported steel as well as other actions in his administration, Woods responded: “We’re trying to provide a level-headed voice because our oil and chemical operations are global.”

Woods said, “The world has benefited from low tariffs and free trade. This has been particularly true under [the North American Free Trade Agreement], where all three countries have benefited.”