NATURAL GAS TO OVERTAKE CRUDE OIL IN NEXT DECADE

The revival in activity in the Gulf of Mexico spurred by natural gas is apparently part of a worldwide trend that is likely to eventually put gas production above that of crude oil.

Nov. 29, 1993

3 min read

The revival in activity in the Gulf of Mexico spurred by natural gas is apparently part of a worldwide trend that is likely to eventually put gas production above that of crude oil.

From 1965 to 1992, worldwide demand for crude oil increased 100% while that for natural gas went up 170% (Fig. 1), according to P.J. Jones of Gaffney, Cline & Associates in the U.K. Quoting figures from a paper coauthored by W.A. Lau, Jones said at the Society of Petroleum Engineers technical conference in Houston last month that gas consumption remained at about 40% of that of crude oil from the late 1960s until 1980, then improved its position to where it now stands at some 57% of crude oil demand.

"During the next 2 decades," Jones said, "the gas business, in energy equivalence terms, is expected to grow much faster than the oil business so that at some stage in the period 2005 to 2010, world gas demand will exceed oil demand. He projected worldwide natural gas demand to grow from 60 tcf now to 71 or 75 tcf by the year 2005. The reason for the range is the uncertainty associated with the politico-economic development of the former centrally planned economies in Eastern Europe and the former Soviet Union.

In a rundown of growth by regions, he classified the Asia/Pacific as one of the hottest areas with growth rates of at least 5% per year to 11.7 tcf by the year 2005.

Demand will climb to 30.4 tcf in the U.S. by 2005. Electrical power generation will play a key role in gas penetration of the total market there. At a new power plant, gas at $3/MMBTU would be favored over heavy fuel oil at $70/metric ton. (Low sulfur heavy fuel was priced at some $95/ton in New York in September.)

The potential in the gas business is analogous to that which prevailed in the oil industry during the 1960s and 1970s. Companies, he said, will likely view the expanding gas industry as potentially more attractive than struggling to maintain competitive positions in a slowly growing oil industry.

MIDDLE AND FAR EAST

Jones told the journal that a new multi-client study by his firm confirms the Middle East's future role as a significant player in the emerging and rapidly expanding global gas market. The countries bordering the Arabian Gulf have 30% of the world's proven gas reserves but accounted for just 5% of global consumption.

According to the new study, this region is expected to increase annual gas exports by a factor of 20, from the present minor level of 120 bcf to 2.6 tcf by the year 2010. Gas exports from the region can be justified to Pakistan, India, the Far East, and Europe.

Exports to the Far East will be in the form of LNG, but pipelines to Pakistan, India, and Europe could be economically feasible.

The Gaffney, Cline study also projects that the potential annual LNG supply shortfall (assuming rollover of existing contracts) in the Far East is anticipated to reach 13 millon metric tons by the year 2000, increasing to 41 million tons by 2010. The ability to meet a significant proportion of this shortfall, coupled with the potential to export 10 million tons/year to Europe, 10 million ton/year to India, and 8 million ton/year to Pakistan, will enable the Middle East to establish itself as a major player in the international gas market.