Natural gas is slowly replacing crude oil as the fuel of choice around the globe, lifted not only by its clean-burning capabilities but by the amazing growth of liquefied natural gas (LNG) and the emergence of gas-to-liquids (GTL), top energy producers said Wednesday at Cambridge Energy Research Associates’ CERAWeek in Houston.

Ralph Alexander, CEO of BP’s Gas, Power & Renewables segment, shared a panel discussion with several top energy executives, including Shell Gas & Power CEO Malcolm Brinded and ChevronTexaco Global Gas President John Gass. The panelists said the growth of natural gas worldwide is reshaping their once oil-dominated businesses, but North American markets will set the pace.

“In North America, the largest natural gas market in the world, BP has penetrated to every sector,” said Alexander. But he added that “North America also has the most worried customers in the world, primarily because of the inability by us on the supply side to balance supply and demand.” Alexander said that for gas to become the leading fuel commodity, “the customer is the most important group to consider. They have the choice to use gas or any other fuel.”

The BP executive said, “It is fair to say, as a producer, that we have lots in the game. But BP also is closely in line with the gas customer and we’ve worked hard to build our gas and trading business.” BP talks “regularly” with customers about their choices, price predictability and performance, and “those issues that are left unanswered will cause gas to lose market share,” reflected in undervalued stock prices.

“What message should we take from our customers about the ability of our product to compete?” Alexander asked. “We should not ignore the issue of switching fuels. The role of gas is as much about defining our international competitiveness.” And volatile prices, he noted, are having a “significant impact” on customers, both residential and industrial.

“We have to get it right today,” said Alexander, “and not just for North America. We must deliver a product that convinces customers to use gas.”

To do this, he said producers first must continue to invest in the “very best technology. If we look at the big picture, we can see there is enough gas in the world, and this will take more drilling with the very best technology. I urge everyone that this is not a time for complacency just because of the higher prices. This is a time to innovate…to get the gas out of the ground.”

Producers also need to support new infrastructure for gas, particularly in places like the constricted Rocky Mountains and in the deepwater offshore, said Alexander. “We need to develop solutions to unlock the gas in places like Alaska. We need that leadership now to get a pipeline.”

Like the other members of the panel, Alexander also stressed a need to connect North American energy users to those in the global marketplace through LNG.

“LNG costs have been transformed and continue to be lower,” he said. “If the trend continues, we believe LNG costs will drop around 3% a year for the foreseeable future.” The “world has abundant gas resources, and the cost of connecting this gas to market is coming down every year.”

The global gas market already is developing, Alexander said. “This is more than just a wild idea. This is a real probability. Africa, the Caribbean, the Middle East are poised to deliver to U.S. markets. The U.S. must focus on market access.” Alexander added that producers and suppliers needed to “raise the game on customer education on LNG. Here in the United States is as good a place as any to start. Ultimately, it’s about building confidence and trust.”

Brinded said that Shell has “growing confidence” in the sustained growth of gas worldwide, driven primarily by the growth in the power sector. Gas also is becoming the fuel of choice for worldwide industry, and Shell does not foresee any gas supply shortages in the future.

“Despite the apparent challenges from mature basins, in a global sense, resources will not be a constraint,” said Brinded. “There is plenty of gas and it is the clear fuel of choice.” As its stature grows for worldwide use, Shell also believes that LNG is “poised for massive growth,” said Brinded. He called today a “pivotal moment for the LNG industry.

“The conditions for LNG imports are right in all of the markets of the world, Asia, Europe and now North America,” he said. “Long distance costs have been cut in half since 1990, and we expect that trend to continue.” And as the use of LNG grows, he added that gas would be “unlocked from locations more and more remote from markets it serves.”

ChevronTexaco’s Gass agreed with his colleagues that gas was becoming the “fastest growing part of the energy business.” The energy business, he said, is going through a transformation that is “redefining our company.” Gas “is becoming a truly different business and redefining the marketplace. As LNG imports increase, there will be the emergence of a new global market for gas, similar to one that exists for oil. It will become inevitable.”

Natural gas has long been the “stepchild of oil,” said Gass. “Not any longer. Those days are gone forever.” He said that the “curtain is lifting on a great natural gas play for our company and for our time.” In the twentieth century, he said, it took a partnership among companies and communities to launch the oil business. “In the twenty-first century, it will take the same to launch the global gas business.”

Brinded also predicted strong growth in the GTL industry. “A whole new gas-to-liquids industry is dawning,” he said. “It’s an attractive proposition on the world scale and as a complement to LNG.” There is “vital interest” in developing GTL technology, which will become important to the “structure of the LNG market in terms of price and safety. It will redefine gas’s role in the future.”

©Copyright 2004 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.