SIZE OF WORLD GAS RESERVES CALLED INTO QUESTION

March 27, 1995
Asia/Pacific LNG Demand Chart (19701 bytes) Some of the ambitious schemes that could nearly double world supply of liquefied natural gas by about the turn of the century have received a reality check. The occasion was the First Doha Conference on Natural Gas at Doha, Qatar. Speakers from the U.K., France, Qatar, Abu Dhabi, and Indonesia focused the first day on world gas reserves with emphasis on the Middle East and LNG projects being pushed around the world.

Asia/Pacific LNG Demand Chart (19701 bytes)

Some of the ambitious schemes that could nearly double world supply of liquefied natural gas by about the turn of the century have received a reality check.

The occasion was the First Doha Conference on Natural Gas at Doha, Qatar.

Speakers from the U.K., France, Qatar, Abu Dhabi, and Indonesia focused the first day on world gas reserves with emphasis on the Middle East and LNG projects being pushed around the world.

The focal point of interest was Qatar's North field, with more than 300 tcf of reserves, the largest single nonassociated gas field in the world. Iran's recent offshore discover of South Pars field gives Persian Gulf reserves a big boost.

NOT CERTAIN

The implication of the Doha conference was that huge amounts of Middle East reserves will find a home in LNG projects.

This is not necessarily so, said Malcolm Peebles, a former director of Shell International Gas Ltd. and now head of a London consulting company, Gas Advisory Services, in a comment from the floor. He was also chairman of a session on prices and economics at the conference.

Peebles said, "I am a little bit concerned that one goes to all these gas conferences and hears the same big figures. I believe they are misleading. I don't think the size of the world gas reserves is anywhere as big as we are made to believe."

He explained that he was not disputing what is in the ground, but he thinks that in many parts of the world it will stay in the ground for the foreseeable future.

"The definition of reserves," he said, "is gas known to exist that is economically recoverable with known techniques."

Alaska North Slope gas reserves are an example of reserves that have been known for some 30 years and will continue to be untapped for a long time.

Peebles believes economically recoverable reserves worldwide are 30% less than the usual figures given.

In addition, he believes there are far too many LNG projects, some of them "pipe dreams" chasing far too little demand. He said he finds it intriguing that the industry is so healthy with so many chasing so little.

He concluded, "It is far better to find a little gas in the right place than a lot of gas in the wrong place."

GAS RESERVES

Neil Dunlop, vice-president of exploration, SSI Consulting, of the U.K., and Rowland G. Speers, technology leader for production geology, BP Exploration, cited various estimates placing the world's remaining proved, conventional gas reserves at 4.57-5.23 quadrillion cu ft.

The Middle East, they said, holds 1.59 quadrillion cu ft, or about 30% of world reserves. Iran has 46% of Middle East reserves, Qatar 16%, Abu Dhabi and Saudi Arabia about 12% each.

However, the Middle East accounts for only 5% of world gas consumption.

As a result, pipeline projects to India, Pakistan, Europe, and the Mediterranean from Persian Gulf states have been proposed.

More popular, however, are LNG projects. At least six proposals are said to be active in the Middle East. If all went ahead, they would add 40 million tons/year of LNG capacity (5.2 bcfd of natural gas) to the world total by the turn of the century, or a 65% increase. Current LNG capacity is 61 million tons/year or 7.9 bcfd.

In addition, Indonesia intends to add 5 million tons/year of capacity at its Bontang, Kalimantan, LNG plant by 1999. By 2005 it wants to start up a 15 million ton/year complex in the Natuna area.

None of the speakers mentioned the dampening effect low priced oil could have on LNG or natural gas projects. One speaker called for "delinking" the price of oil and gas but did not outline a course of action.

However, J. Robinson West, former assistant secretary of the U.S. Department of Interior, and now president of Petroleum Finance Co., said oil and natural gas were indeed delinked in the U.S. He did not elaborate on this in light of the plunge in U.S. natural gas prices last summer as the price of oil fell solidly.

LNG PROJECTS

There is no doubt that the Qatar Liquefied Gas Co. project, as a visit to the site at Ras Laffan shows, is well on the way toward delivering its first gas at a rate of 4 million tons/year in early 1997.

In fact, a second deal has been secured that calls for a third train to deliver an additional 2 million tons/year.

All buyers for the LNG are Japanese electric utility companies with Chubu Electric Power Co. Ltd., Tokyo, the largest buyer.

Partners in Qatar LNG are Qatar General Petroleum Corp. 65%, Mobil Corp. 10%, Total 10%, Marubeni 7.5% and Mitsui 7.5%.

Enron Corp. has signed a letter of intent with QGPC for another 5 million ton/year plant in Qatar. Timing is not known.

Across the fence from the Qatar gas project, the huge Ras Laffan LNG Co. Ltd. project is still open ground. A venture of QGPC 70% and Mobil 30%, it is slated to turn out 10 million tons/year by 1998.

No purchase contracts have been reported signed for the gas. However, Korea Gas Corp. is said to want 2.4 million tons/year. Two million tons/year to a Turkish company is in the memorandum of understanding stage, while 2.1 million tons/year to Taiwan's Chinese Petroleum Corp. is under a letter of intent.

Asked how solid the Ras Laffan project is at this stage, Nassr K. Jaidah, director of exploration and development of new ventures for QGPC, said the basic plant design is complete and he is confident his company will wrap up discussions with buyers in a few weeks.

He said, "We know where we stand. It is quite clear, and we don't have any doubt this project will be fulfilled by 1999.11

At least one close observer believes Ras Laffan is in a race with Oman's LNG project, also targeted for entry into the market in 2,000. He doesn't think the market can take both at the same time.

The government of Oman, Shell, Total, Partex, Mitsubishi, Mitsui, and Itochu (Japan) have formed Oman LNG Co. to build a 6 million ton/year LNG plant at Al-Ghalilah. The government has dedicated 7 tcf of reserves to the project.

LNG DEMAND

World LNG demand will continue to be dominated by Japan. Japan imported the oil equivalent of 45 million tons, or some 860,000 b/d of LNG in 1994.

H. Baharuddin, senior vice-president of oil and gas marketing for Indonesia's Pertamina, sees this demand climbing, in a high case in Japan to 53.6 million ton in 2,000 and 61.5 million tons in 2005.

The Japanese Energy Research Institute sees Japan needing less: 50-51 million tons in 2,000 and 54-62 million tons in 2010.

Baharuddin sees total imports by Japan, Korea, Taiwan, China, Thailand, and India reaching 70-75 million tons in 2000, 85-105 million tons in 2,000, and 100-140 million tons in 2010.

Baharuddin proposes that LNG tankers returning to the Persian Gulf from Japan could backhaul LNG from, for example, Indonesia to India to cut costs.

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