Statoil Bullish on Gas Prices, Plans LNG Imports
Statoil Energy is bullish on gas prices this winter and over the
long haul, so bullish, in fact, it may begin long-term LNG
importing in the next few years, company officials said at a press
briefing last week at the company's U.S. headquarters in
"One interesting thing that may affect [the supply-demand]
equation in the coming years is LNG coming into the U.S. Oil is a
world commodity. Natural gas is not. But we see that the technology
has changed enough both in terms of processing gas into LNG as well
as the shipping and receiving aspects that LNG is becoming a much
more viable enterprise not just for Japan but potentially for North
America," said CEO David Dresner. "It's one of the roles we hope to
play here. We hope to see Norwegian gas hitting our shores here in
the next four or five years."
Norway's Statoil, for which the North Sea is home, is the
world's second largest exporter of crude oil. Dresner said the
company recently discovered gas offshore northern Norway where it's
impractical and uneconomic to build a pipeline to northern Europe.
One of the options being explored is building an LNG plant there
and exporting to North America, Israel and Spain. "That way they
could arbitrage the European continent against the U.S. market in
the future for gas in the same way they currently arbitrage for
crude products on a regular basis. It's good for Statoil, but it's
also good for the U.S. because in the long run we're not going to
be able to keep up with demand."
Dresner expects this winter to be a significant turning point
for gas demand. "After two winters without a winter, I'd say we're
due," he said. "We're due with El Nino and so forth. Looking longer
term, I think there's lots of reasons to be bullish about the gas
market. The fact that oil prices are so horrible is very bullish
for the gas market because that means fewer oil wells will be
drilled and that's a major source of gas. We expect to see some
lesser amount of production of natural gas coming out if the market
stays where it is for oil."
Furthermore, most of the gas in the U.S already has been
discovered, he said. "[We're just fighting] decline. We have 7,000
wells that we currently operate. We're drilling 200 wells a year.
We'll grow our production but it's hard to grow it at a very
substantial rate." Other bullish fundamentals include the robust
economy, the rapid growth of housing and the abundance of new
gas-fired power plants proposed. "There's a whole series of things
on the demand side that look very bullish, and there's at least
something temporarily on the supply side that will affect the
Dresner said Statoil is actively exploring LNG terminaling
arrangements, including possibly investing in a revamping of
Columbia's mothballed import terminal at Cove Point, MD, or
bringing LNG to Citrus Corp.'s Elba Island, GA, import terminal.
"Cove Point would require some investment to convert to [import
capabilities], but Statoil is not the only one looking at this in
the marketplace," he said. "Cove point was very successful, but
then in a blink of an eye the marketplace changed. Now it's looking
like it will be sustainable both because gas prices look healthy
for a good 10 years out certainly and the technology and efficiency
of LNG has improved so dramatically."
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