Natural gas is the fastest growing primary energy source in the world and gas demand is projected to grow by 2.4% per year through 2020 as its share of worldwide energy use shoots up to 25% of the total from its current level of about 20%, said Scott Nauman, gas marketing manager for the Americas at ExxonMobil.

However, tight domestic supply and demand and improving economics of shipping liquefied natural gas (LNG) will continue to drive the natural gas industry to a global marketplace, Nauman said in a speech at the GasMart conference in Denver Tuesday.

“Worldwide there is plenty of natural gas out there; we’re not going to run out,” he said.

Globally, the growth in demand, which will be most pronounced in developing areas of Russia/Eastern Europe, Asia and Africa, will move total gas use from about 300 Bcf/d in 2000 to 400 Bcf/d in 2020, according to ExxonMobil’s projections. Oil growth is projected to grow by 1.7% annually, while coal is seen growing at 1.4%/year through 2020.

About half of gas’ projected growth between now and 2020 will be to serve electric power generation, Nauman said. “Statistically, power continues to gain a greater share of the overall natural gas market.”

With growing demand there is also a growing disparity between where the markets are located and where gas supplies are located, and for Nauman this makes LNG essential. “LNG over time will continue to build a much more global gas market,” he said, adding that it and other aspects of globalization will require much greater investments in gas infrastructure.

“LNG is the way the gas market will be bound together as a global enterprise,” said Nauman, projecting that LNG daily volumes in North America will grow from the 1.4 Bcf/d level in 2003 to 5.5 Bcf/d in 2020.

For North America, there will be greater emphasis on LNG imports, but this doesn’t preclude an Alaskan natural gas pipeline sometime after 2010, Nauman said. “LNG and Alaska are not mutually exclusive.”

While acknowledging that there are more than 40 proposed LNG receiving terminals projected on the East, West and Gulf of Mexico coasts of North America, Nauman said that most of these projects will never get built. The 40-plus proposed terminal sites would represent about 40 Bcf/d of additional supply, he noted.

Ultimately the projects that are backed by large financially strong sponsors with upstream positions in the natural gas market are most likely to be the ones building LNG import terminals, said Nauman, placing ExxonMobil among the type of companies that will need to be involved.

Overall LNG costs are going down and should continue that trend, he pointed out, driven by economies of scale. For instance, LNG tankers today have a capacity of 140,000 cubic meters. The next generation of ships will be three football fields long and will carry 200,000-plus cubic meters or 4-5 Bcf of gas. Liquefaction facilities also are growing to the point where the newest liquefaction plant only holds the title of the “largest” for about six months, until the next one goes on line. Nauman said technology and size have reduced the costs of getting LNG to market by 30% over the last five years.

Responding to questions about safety, Nauman said LNG transportation has an unblemished record of 33,000 voyages totaling more than six million miles without a significant incident.

He also defended the majors’ role in domestic production, saying it was natural that they would move on to larger plays. But he maintained that the main factor in ExxonMobil’s domestic production decline was just that, a decline from existing wells, rather than from the sales of properties.

Following on a call by NGI Publisher Ellen Beswick for increased participation in the voluntary price reporting system, Nauman said ExxonMobil, one of the top 10 gas sellers, reports gas prices to industry trade publications for index calculations; it “always has.” Larger entities tend to report, while smaller one don’t, Nauman observed. But “it will help us all if everyone reports. It will help no one if the government tries to establish mandatory price reporting. It is important to put this issue to bed because I think there are bigger issues for the industry.”

Nauman pointed out that over 90% of buyers and sellers use the data, which points to confidence in the indices, and that when specifically asked to rate their confidence levels on a scale of 1 to 10 (10 being highest), more than 90% rated their levels as 5 or higher.

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