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Economic Forces Drive Gas to Bigger Global Markets, ExxonMobil Exec Says
Natural gas’ share of worldwide energy use will shoot up to 25% from its current level of about 20%, said Scott Nauman, gas marketing manager for the Americas at ExxonMobil, predicting that oil and natural gas will continue for the next 50 years to be the dominant fuels, with gas’ proportion growing as its annual growth rate outstrips both oil and coal.
Tight domestic supply and demand will continue to drive the natural gas industry to a global marketplace and LNG will be a large part of that transformation, Nauman noted 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,” said Nauman, who had started out his presentation with an endorsement of the voluntary price reporting system. 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 to publications; 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.
Undaunted by some skeptics within and outside the industry, Nauman painted a bullish picture for gas. While recognizing that the current $5-7 range of gas prices could dampen growth in gas demand if they stay locked at this level and that safety-siting concerns for liquefied natural gas (LNG) need to be dealt with, he thinks the economic need for new gas supplies through greater imports worldwide would outweigh these factors.
Natural gas’ role in economic growth, particularly in developing countries, and its “favorable attributes” make the global growth inevitable to Nauman, whose 20-plus years with ExxonMobil have been mostly in the production side of the business in various parts of the world.
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, which see gas growing at a 2.4% rate annually over the next 16 years, while oil growth will be at a 1.7% annual rate and coal at 1.4%/year.
About half of gas’ projected growth between now and 2020 is for 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,” said Nauman, 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,” he said, projecting that LNG daily volumes in North America will grow from the current 14 Bcf/d level to 55 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. Projected growth in LNG imports in North America is 10 Bcf/d by 2010, while the 40-plus proposed terminal sites represent more than 40 Bcf/d, he said.
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, definitely 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/d. 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.
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