Shale gas ‘revolution’ impacts to vary across globe: OTC panelists

The impacts that the international liquefied natural gas market will see from shale gas production growth in North America and across the globe will vary widely according to local market conditions, members of a panel at the Offshore Technology Conference in Houston said Wednesday.

In the US, where the “shale gas revolution” first started and already is well under way, domestic gas supplies have severely cut into the demand for imported LNG, Emma Cochrane, manager of gas power and marketing for ExxonMobil, said.

With ample gas supplies to meet US gas demands most of the time, LNG imports will largely serve to meet seasonal balancing needs, she said.

“Imports will mostly come in the summer, where there is nowhere else for the gas to go,” Cochrane said. As a result of the inflow of gas supplies from shale plays across the nation, “the US becomes almost self-sufficient” in meeting its gas demand in the future.

In other regions of the world, however, the growth of shale gas production will be less of a factor in supply-and-demand dynamics than more localized factors, Rafael McDonald, associate director of global gas research, IHS CERA, said.

“We see an acceleration of the tightening of the global gas market,” he said. However, the resurgence of gas demand in the wake of the global recession will result in “a multi-speed recovery,” with some regions outpacing others.

“In terms of GDP and gas demand, some places never dipped, like Brazil and China. Some dipped but came roaring back, like South Korea, and some continue to languish,” he said.

Australia, which has ambitious plans to dramatically increase its liquefaction and LNG export capacity, could someday surpass Qatar as the world’s largest LNG exporter, McDonald said. “There are some questions still. There 28 million tons of capacity already, with over an additional 100 million tons of capacity planned,” he said.

He added that “all of that can’t come on line,” as Australia does not have the resources to increase its LNG capacity to the extent that LNG developers envision.

Davis Thames, president of Cheniere Marketing, described how the changing dynamics of the international gas market has led his company to announce plans to convert its Sabine Pass LNG receiving terminal in Cameron Parish, Louisiana into bi-directional terminal capable of exporting as well as importing LNG.

“In the US, we have a natural gas market that doesn’t exist anywhere else in the world,” he said. Technological innovations in gas production techniques have resulted in “a tremendous amount of gas,” coming onto US markets, driving down the domestic costs of gas and destroying the economic rationale behind building LNG import-only terminals.

As a result, Cheniere is reinventing its business model from the traditional LNG import terminal, Thames said.

“We’re providing a midstream service,” he said. Cheniere’s proposed bi-directional LNG facility “looks more like a pipeline,” than a traditional LNG import terminal, he said.

Houston-based Cheniere, which owns the 4 Bcf/d Sabine Pass LNG import terminal, in August 2010 applied to US authorities for permission to export gas produced in the Lower-48 states.

–Jim Magill, jim_magill@platts.com

Original Article

Posted on May 5, 2011, in GEOPOLITICS, Houston, LNG, Natural Gas, Oil & Gas - inland, Shale Gas and tagged , , , , , , , , , , , , . Bookmark the permalink. Comments Off on Shale gas ‘revolution’ impacts to vary across globe: OTC panelists.

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