Statoil Energy is bullish on gas prices this winter and over thelong haul, so bullish, in fact, it may begin long-term LNGimporting in the next few years, company officials said at a pressbriefing last week at the company’s U.S. headquarters inAlexandria, VA.

“One interesting thing that may affect [the supply-demand]equation in the coming years is LNG coming into the U.S. Oil is aworld commodity. Natural gas is not. But we see that the technologyhas changed enough both in terms of processing gas into LNG as wellas the shipping and receiving aspects that LNG is becoming a muchmore viable enterprise not just for Japan but potentially for NorthAmerica,” said CEO David Dresner. “It’s one of the roles we hope toplay here. We hope to see Norwegian gas hitting our shores here inthe next four or five years.”

Norway’s Statoil, for which the North Sea is home, is theworld’s second largest exporter of crude oil. Dresner said thecompany recently discovered gas offshore northern Norway where it’simpractical and uneconomic to build a pipeline to northern Europe.One of the options being explored is building an LNG plant thereand exporting to North America, Israel and Spain. “That way theycould arbitrage the European continent against the U.S. market inthe future for gas in the same way they currently arbitrage forcrude products on a regular basis. It’s good for Statoil, but it’salso good for the U.S. because in the long run we’re not going tobe able to keep up with demand.”

Dresner expects this winter to be a significant turning pointfor gas demand. “After two winters without a winter, I’d say we’redue,” he said. “We’re due with El Nino and so forth. Looking longerterm, I think there’s lots of reasons to be bullish about the gasmarket. The fact that oil prices are so horrible is very bullishfor the gas market because that means fewer oil wells will bedrilled and that’s a major source of gas. We expect to see somelesser amount of production of natural gas coming out if the marketstays where it is for oil.”

Furthermore, most of the gas in the U.S already has beendiscovered, he said. “[We’re just fighting] decline. We have 7,000wells 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 verysubstantial rate.” Other bullish fundamentals include the robusteconomy, the rapid growth of housing and the abundance of newgas-fired power plants proposed. “There’s a whole series of thingson the demand side that look very bullish, and there’s at leastsomething temporarily on the supply side that will affect themarket.”

Dresner said Statoil is actively exploring LNG terminalingarrangements, including possibly investing in a revamping ofColumbia’s mothballed import terminal at Cove Point, MD, orbringing LNG to Citrus Corp.’s Elba Island, GA, import terminal.”Cove Point would require some investment to convert to [importcapabilities], but Statoil is not the only one looking at this inthe marketplace,” he said. “Cove point was very successful, butthen in a blink of an eye the marketplace changed. Now it’s lookinglike it will be sustainable both because gas prices look healthyfor a good 10 years out certainly and the technology and efficiencyof LNG has improved so dramatically.”

Rocco Canonica

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