THE BUSINESS: World turns on the gas taps as oil prices soar: “ChevronTexaco and Shell are negotiating exploration and LNG export agreements with Gazprom, the Russian natural-gas giant.”: “Last year Shell and Total were given a concession to look for gas in an 80,000-square-mile region in Saudi's southeast.” (ShellNews.net)
By Joe Lauria
IN NEW YORK
17/18 Oct 04
WITH oil prices soaring amid predictions of world production peaking in the next decade, western energy companies are increasing their investment in natural gas production, refinement and transport.
There is a surplus of natural gas and energy majors are concluding multi-billion dollar deals to bring liquefied natural gas (LNG) to industrialised nations. The price of natural gas last week hovered around $7.25 per thousand cubic feet, double what it was in the mid-1990s. Analysts say that if gas stays above the $6 threshold it will be profitable to expand drilling. Countries with huge gas
reserves, notably Russia and Qatar, are aggressively approaching western energy majors for investment.
BP in September put in a $1.5bn (£840m, €1.2bn) order for eight tankers that will transport liquefied natural gas. In July, Exxon-Mobil struck a deal to invest $7bn in a project in Qatar that will convert natural gas into diesel and other fuels. Exxon last year also sank $12bn into a deal to export LNG from Qatar. Royal Dutch /Shell and ConocoPhillips plan LNG plants there at a cost of $5bn.
ChevronTexaco and Shell are negotiating exploration and LNG export agreements with Gazprom, the Russian natural-gas giant. Last month, France's Total took a 25% stake in Novatek, a Russian private natural-gas company, for $lbn.
Some Middle Eastern nations that block western investment in oil are opening the door to foreign involvement in gas. Saudi Arabia earlier this year awarded Russia's Lukoil rights to explore and produce gas near Ghawar, the world's largest oil field. Last year Shell and Total were given a concession to look for gas in an 80,000-square-mile region in Saudi's southeast.
World natural gas consumption last year was 91.5 trillion cubic feet, a 13% rise from five years ago as opposed to a 7% jump in oil use in the same period, according to BP In the US, there is a natural gas shortage: about 4.9 trillion cubic feet of natural gas was used in power plants last year, up 40% from 10 years ago.
Charles Maxwell, analyst at Weeden & Co, said that global natural gas production wouldn't peak until around 2035. World petroleum production will peak between 2015 and 2020 and Non-Opec production around 2010.
Despite the gas surplus, most deposits are a long way from western markets and are difficult to transport. Gas must first be liquefied and later reconstituted for use.
Government approval for LNG terminals in the US is being held up and most won't be on line until 2008. That will mean a natural gas shortage in the US. The US provides only 4% of LNG global demand and imports will be slowed until the terminals are up and running.