WGC: Reversing gas misperceptions a must

June 8, 2006
Perceptions of natural gas and their effects formed the core of two keynote speeches on the second day of the World Gas Conference in Amsterdam.

Warren R. True
Chief Technology Editor-LNG/Gas Processing

AMSTERDAM, June 8 -- Perceptions of natural gas and their effects formed the core of two keynote speeches on the second day of the World Gas Conference in Amsterdam.

Chevron Corp.'s Chairman and Chief Executive David J. O'Reilly took up the issue of energy security—of supply to consumers and of demand for producers—saying that the debate over energy security will determine whether the current global economic expansion can be sustained.

BG Group PLC Chief Executive Frank Chapman reminded the industry of the opportunities the current market affords players but also urged it to respond forcefully to misperceptions about natural gas and the industry that supplies it.

Security framework
Energy security, said O'Reilly, can only be achieved within a framework of open markets, sound government policies, robust technology, energy efficiency, and responsible leadership.

With natural gas demand projected to grow by nearly 70% in the next 20 years, gas has "emerged as a new centerpiece of the global energy industry."

Open markets encourage the free flow of capital and investment and the sharing of transparent, detailed information on supply and demand, O'Reilly said; "Transparency and predictability must guide the global investment environment."

Government policies, he added, must be predictable and support secure fiscal and regulatory regimes. Governments must develop policies that reflect the understanding that global energy markets are interdependent [and that] "nationalistic policies. . .will ultimately undermine global energy security."

Also, investment will drive development of robust technologies. "Meeting global energy demand will require unprecedented advances in technology to help find and produce a diverse mix of energy sources," he said.

O'Reilly cited Chevron's Gorgon LNG project as an example of the company's commitment to both investment and technology.

Energy efficiency is the "cheapest form of energy we have," said O'Reilly, and industry and consumers should focus on "capturing new energy savings in transportation, power generation, and facilities management."

All this will require responsible and accountable leadership from key players throughout the energy chain.

Development of a global market for natural gas, as has been advanced with LNG progress, is a primary catalyst for this framework for energy security.

LNG, with its increasing diversity of suppliers and customers, O'Reilly said, epitomizes this flexibility, which is redefining relationships between natural gas customers and suppliers, "replacing a straight line with a global web that links buyers and sellers anywhere and everywhere."

BG's Chapman noted the huge opportunities the currently robust natural gas markets afford companies. Not only are high prices supporting major LNG investments but they are also supporting the return of "big-pipe gas projects," such as the North European Gas Pipeline, and the Alaskan and Nabucco proposals.

Furthermore, the need for huge volumes of replacement gas to meet declining indigenous supplies in main Western consuming countries, he said, is "driving growth in Atlantic Basin trade." This combination of replacing existing supplies and meeting new demand growth will require more than "100 bcfd of new production" by 2015.

But Chapman thinks the ascendancy of natural gas may be threatened by the widespread acceptance among consuming sectors of certain myths about natural gas: that gas is less reliable just because there have been historical disruptions in oil supply and that an ongoing conspiracy exists to deprive developed markets of much-needed energy.

Allowing "such notions and the fear they engender to diminish the reputation of gas as a secure and reliable energy source" is fundamentally flawed.

The global gas industry, he said, doesn't make a case for gas "with sufficient clarity and conviction." Industry can make such a case by crafting a message around four realities:

-- Natural gas is abundant, with a reserves-to-production ratio of more than 65 years of current demand.

-- Natural gas is the cleanest hydrocarbon compared with either coal or oil.

-- Disruption of international gas trading has been negligible over the 40 years of supply history.

-- Natural gas moves via pipeline and LNG carrier using technologies that are established and reliable. No technological or economic breakthroughs are necessary.

Consuming countries, he said, are looking to nuclear, clean coal, and renewables, in part, because they see them as "home grown" technologies and therefore more secure.

Only when major components of the oil and gas industry—producer countries and national, major, and independent oil and gas companies—cooperate to "challenge the misconceptions about the capacity of natural gas to meet energy supply [and] reverse the growing perception of gas as risky" will these views be changed.

Contact Warren R. True at [email protected].