While unconventional resources are playing a large role in the gas market, unconventional liquefied natural gas (LNG) is expected to have a much smaller part on the world gas stage, according to consultant Wood Mackenzie.
Unconventional LNG can take two forms: It can be liquefied gas from unconventional plays (gas shales or coalbeds) or it can be LNG that has been liquefied offshore in a floating LNG facility, Wood Mackenzie’s Frank Harris, head of the firm’s LNG consulting, told attendees at the LNG16 conference in Oran, Algeria, last Tuesday. He predicted that unconventional LNG of both varieties will account for no more than 5% of global LNG supply in 2020.
Harris noted that there are multiple unconventional LNG projects proposed for Queensland, Australia, as well as North America and Indonesia. “We fully expect unconventional gas feedstock to become a feature of the LNG supply industry, but its suitability as a feedstock for LNG appears limited and it will be geographically constrained — it is hard to see the next Queensland at the moment,” Harris said.
The consultant said unconventional gas is attractive to the LNG industry because of three factors. For one, it is largely accessible and not controlled by the national oil companies; secondly, there are limited exploration risks; and finally the raft of unconventional projects under way is attracting significant investment, which is enhancing project economics through the experience curve, he said.
“However, there are some unconventional gas-rich areas where it doesn’t make sense to liquefy the gas,” he said. “We believe that unconventional gas resources in China, Europe and India are unlikely to be suitable as LNG feedstock because of accessibility issues and/or the availability of more viable alternatives. In these cases, assuming that the resources can be developed economically, we expect it to be more viable to monetize the gas by supplying it via pipeline into local or regional markets rather than by monetizing it as LNG.”
Harris predicted that floating LNG will be merely a “niche play” in the LNG world. Royal Dutch Shell plc is among those advancing floating LNG strategies. The company said last fall it would use its floating LNG technology to develop its Prelude and Concerto gas discoveries in the Browse Basin off the northwest coast of Western Australia (see NGI, Oct. 12, 2009).
“Whilst unconventional LNG does have an, albeit limited, role to play, the significant impact of unconventional gas on the LNG industry is more likely to be the reduction in LNG demand that it causes. We have certainly seen this in North America where shale gas has significantly impacted LNG demand,” he said.
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