Wood Mackenzie energy and metals analysts collaborated to identify what they believe will be the major themes of 2013 that could materially impact the long-term landscape. Among other things, keep an eye on growth in the natural gas for transportation markets, said analysts.
“Compelling arguments in favor of gas as a transportation fuel are beginning to emerge in key markets,” said Noel Tomney, who heads global gas research. “Corporate interest is building, and 2013 could be a critical year for investment in the sector. China has seen some growth in recent years, but North America is the market to watch in 2013.”
Gas has had a “long but relatively limited role as a transport fuel,” but recent developments “may be tilting the market in its favor. Pressures to increase efficiency and reduce emissions are leading road and sea freight operators to look for alternatives to diesel and bunkers, and the shale revolution has created a glut of low-priced gas in North America.
“Natural gas offers consumers lower emissions and lower cost, and the energy industry a windfall opportunity in monetizing the spread between oil and gas prices.”
The Wood Mackenzie team noted that Royal Dutch Shell plc this year made a final investment decision (FID) on a liquefied natural gas (LNG) facility in Jumping Pond, Canada. Fed by unconventional gas, the plant is dedicated to produce fuel for trucks working the Alberta-to-Pacific Coast route. The FID followed a memorandum of understanding in June with truck stop operator TravelCenters of America LLC (see Daily GPI, June 11). Last month, a Shell unit also signed a five-year deal with Bison Transport to provide LNG for 15 tractors in Alberta, one step in its efforts to establish a transportation fueling network in the province (see Daily GPI, Nov. 7).
As well, “Sasol recently announced an investment of up to $21 billion in a gas-to-liquids plant in Louisiana,” said the Wood Mackenzie team (see Daily GPI, Dec. 4). “Producing up to 96,000 b/d, the facility is due onstream in 2018.” And “PetroChina has donated over 100 LNG-fueled buses to Beijing and plans to build LNG refueling stations in the city.”
Because oil for transport “equates to approximately 14% of world primary energy demand, replacing even a small fraction of this represents a huge potential market for natural gas,” said Tomney. “North America, with high transport demand, a well-supplied gas market, and a gas pricing regime which is not linked to oil is likely to see the most interest from investors.”
European gas prices are “largely linked to oil, but here environmental mandates may prove the incentive” for LNG and compressed natural gas “to move more significantly into the transport sector. There are presently multiple initiatives to supply LNG as a bunker fuel in Europe, responding to European Union limits on sulfur emissions from shipping.”
According to Wood Mackenzie, “Shell is likely to follow Jumping Pond with two similar projects in the United States, and currently states an interest in gas-for-transport projects totaling 5 million tons/annum (mtpa) (243 Bcf/year). Sasol is expected to take FID on its Louisiana project in 2014. If oil-gas price differentials remain healthy through 2013, this will likely trigger a host of new gas-for-transport supply projects.
“However, demand-side challenges remain. How quickly consumers switch, incentivized by cost, environmental or other reasons, will determine whether gas takes off as a transport fuel, and makes a material impact on demand for oil.”
“2013 is set to be another vibrant, complex and challenging year for the energy and metals industry,” said CEO Stephen Halliday. “As emerging market growth slows and the developed world continues to grapple with its own economic problems, commodity markets are seeking direction. Market dislocations are challenging, but also represent the opportunity for the development of new markets.
“Technology, infrastructure and regulation could facilitate or hinder the extraction value in these new markets. The need for resource-rich countries to maximize revenue to balance budgets is opening up access to new provinces. Oil and gas companies continue to invest in new supply despite the threat of further downward price movements; an energy-independent North America could be the result, if infrastructure hurdles can be overcome.”
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