Supplying the growing demand for natural gas in the future willbe a foot race between the costs of producing it and the constantlychanging technology to market it. Marketers also have to leap twoimportant hurdles — regulations and taxes — before crossing thefinish line. Still, it’s a race with a lot of winners, says StuartMcGill.

McGill should know. As president of ExxonMobil Gas Marketing,the world’s largest nongovernmental gas marketer, McGill overseesgas and liquid natural gas sales in 25 countries. Speaking lastweek at the GasTech 2000 conference in Houston, McGill said thatenergy would be at the “heart of economic development” in thefuture, with natural gas leading the way.

“Demand for natural gas is growing in all regions,” he told theinternational delegates. “Free markets demand flexibility, andnatural gas provides more flexibility than other fuels” in how itis marketed and in the types of products available. However, McGillnoted that even though the future looks bright, “we have to findenough” of it.

“It’s a race between increasing costs and technology. So far,technology has prevailed, and technology continues to be the futureof our industry,” he said.

Because large field discoveries have steadily dropped since theearly 1960s, the discoveries of smaller fields are all the moreimportant, and the pace to develop them has to be maintained. Butthere are obstacles not related to technology that also aredeterring growth. McGill said that taxes and regulation would bethe two “most important determinants” for the natural gas industryin the future.

The “government take,” he said, referring to taxes, “is a bigslice of the delivered price. Some attention to taxes is in order.If the government sees natural gas as the future, it will have tolighten the tax burden.”

Regulations are playing more havoc with marketers today thanever before because they are in a state of flux, said McGill.”Whatever the deregulated market turns out to be, there should beless regulation, not more,” he said, referring to recent calls formore guidelines. “The only good thing about the U.S. regulatorymarket today is that it’s better than it used to be. It’s just nota single one-size-fits-all system. It can’t be.”

Laying out several principles for regulation in the future,McGill said that while rules are a “necessary evil,” the governmenthas to “rely on markets and capitalism to protect the people.” Forthe meanwhile, the cost of bringing gas to market “likely willincrease.”

Carolyn Davis, Houston

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