Exploring for or exploiting already discovered conventional resources, as well as developing additional unconventional resources, are options for supplying the global demand for liquefied natural gas (LNG) which will nearly double by 2025, according to Wood Mackenzie.

“Significant” liquefaction capacity and 180 Tcf of natural gas will be required to meet the demand, said Frank Harris, Wood Mackenzie head of global LNG consulting, who spoke Wednesday at LNG 17 in Houston.

Supply must not only increase to satisfy incremental LNG demand growth of 4.5%/year out to 2025, but it also needs to replace lost supply from a number of existing LNG supply projects, Harris said. These are projects where production is going into decline, either due to depleting reserves or diversion of reserves to meet demand from local gas markets.

“Several major gas resource-holding countries, such as Egypt and Indonesia, now have such strong domestic demand for gas that reserves can no longer be made available to fully support export — from new, and in some cases existing facilities,” Harris said. “This creates the requirement to look for new sources of supply. The good news, however, is that the industry is now awash with gas, partly due to successful exploration for conventional gas, but largely due to the huge growth in unconventionals.”

In North America, the shale gas revolution has created the potential for significant LNG exports, but developing export projects is proving far from straightforward. And a wave of gas-focused exploration from Australasia to East Africa to the Levant has added significant new reserves, but as always, turning this gas into LNG remains a challenge.

There are three core options for securing gas, according to Wood Mackenzie: exploiting already discovered conventional resources; exploring for additional conventional resources; and/or developing unconventional resources. However, each of these options has its challenges, typically a mixture of technical, political and/or economic factors.

“From the LNG industry’s perspective, this means that the main challenge is how to combine exploitation of discovered conventional resources, with exploration for more conventional gas and the development of unconventional resources,” Harris said.

While unconventional gas-to-LNG remains a prominent industry theme, Wood Mackenzie said there are limits to its ultimate role, driven by a combination of competing, domestic requirements for gas, economics and environmental concerns. “Unconventional gas for LNG is an increasingly exciting development opportunity for the industry, although local issues may restrict its ultimate contribution,” said Noel Tomnay, the firm’s head of global gas research.

Harris said recent developments, such as those in eastern Australian coal seam gas, have confirmed the views of some buyers that, given the emerging nature of the opportunity, unconventional gas-into-LNG is best approached incrementally. “We expect gas-focused exploration to continue as a major theme, particularly in light of burgeoning exploration budgets, but there will be the need for greater or increased focus, otherwise players risk just adding to the bank of already stranded gas,” Tomnay said.

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