WGC09: Gas projects need long-term investment, responsible execution

Natural gas has come of age, said George Kirkland, executive vice-president, upstream and gas, Chevron Corp., in a keynote speech on the second day of the 24th World Gas Conference in Buenos Aires.

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

BUENOS AIRES, Oct. 7 -- Natural gas has come of age, said George Kirkland, executive vice-president, upstream and gas, Chevron Corp., in a keynote speech on the second day of the 24th World Gas Conference in Buenos Aires.

Once a “second prize to oil,” gas is now a premium commodity. To retain this status, he said, and meet projections by the International Energy Agency that it make up 50% of global energy mix by 2030 requires lower development costs, long-term investment, and superior project execution.

Didier Houssin, director of the Directorate of Energy Markets and Security for the International Energy Agency, told conference attendees the global recession has afforded the world an opportunity to address climate change as growth in overall energy demand pauses.

Manage projects
Evidence is growing, said Kirkland, that development costs have started to come off their highs of only 15 months ago. That’s an important step, he believes, in encouraging serious, long-term investment. Such investment must be guided by transparency, predictability, and discipline.

“Stable, predictable, and reasonable terms are needed to ensure investment continues to flow. Taxes, fiscal regimes, sound regulatory structure, and sanctity of contracts must be in place and fit together,” he said.

Speaking in light of Chevron’s recent commitment to two massive LNG projects—Gorgon and Wheatstone—Kirkland stressed: “We must efficiently and cost-effectively deliver on projects that fulfill our commitments to host governments and buyers.”

He said, “This means building projects in a safe, reliable, economic, and environmentally responsible manner. Our industry must be proficient at managing large, complex projects with multiple partners in challenging environments.”

Climate change
The current economic recession has depressed demand and gas prices from their highs of mid-2008, noted Houssin. IEA estimates demand in countries of the Organization for Economic Cooperation and Development has fallen by 6.5% in 2009 compared with 2008. And for the first time since World War II, global electricity demand has fallen, he said.

IEA has two concerns, said Houssin: climate change and energy security. “This economic crisis, in depressing demand, has given us a window of opportunity to bring about change.” In the struggle with climate change, “gas comes off better than alternatives because the latter are less proven and take longer to build,” he said.

Two patterns in natural gas demand are evident in the near future, he said: demand for power generation has been cut in half, and demand among non-OECD nations has increased.

As a result, investments in the near future will slow, which will in turn delay final investment decisions for projects needed to meet growing global energy demands. With demand likely to recover more quickly than investments, that will put a squeeze on supply.

Contact Warren R. True at warrent@ogjonline.com.

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