Comments: The Gas Age
Authors: Donnelly John 
Published: February 2015

There is a reason why gas is playing a more prominent role at industry conferences and events. Gas took center stage at the opening general session of the 2005 SPE Annual Technical Conference and Exhibition (ATCE) with a discussion of “The Global Natural Gas Business in 2015” (see story on p. 30). Issues surrounding gas monetization, markets, and technology also played a significant role at SPE’s first International Petroleum Technology Conference in Doha. Studies show gas consumption eventually overtaking oil. The acronyms LNG and GTL have become common across the industry.
Energy forecasts, whether by government agency or individual company, predict gas increasingly becoming the fuel of choice going forward, its consumption growth outstrip-ping oil, coal, or alternative fuels. The U.S. Dept. of Energy forecasts global natural gas consumption increasing nearly 70% between 2002 and 2025, with the strongest growth coming from eastern Europe, the former Soviet Union, and Asia. The Intl. Energy Agency sees strong gas growth over the next 2 decades in Africa and Latin America as well as in the mature economies in North America and Europe. Linda Cook, Shell’s Executive Director of Gas and Power, said during the ATCE opening general session that Shell forecasts gas demand to rise 3% per year over the next 15 years, with demand for liquefied natural gas (LNG) increasing at an even stronger pace. ExxonMobil expects gas to account for about 25% of total energy needs by 2030 and for LNG’s share of the gas market to double. Power demand is expected to account for the lion’s share of gas consumption growth.
Technology has made gas production and transportation easier, and its environmental qualities undoubtedly have appeal. Gas development is moving ahead quickly—more resources are being produced, and remote resources and transportation are becoming more viable. Technological advances, consumer demand, and new sources of supply are allowing the creation of interregional markets for gas. The next step is true globalization of the gas market, accelerated by LNG. Liquefaction costs continue to fall with the introduction of more efficient trains and improvements in ship capacity. Oil consumption increased rapidly in the last century because it could be easily transported and traded. Its fungibility eventually led to active futures and spot trade markets. Natural gas to date has largely been a local phenomenon, with much gas left “stranded” because it was impractical to get it to consuming centers. Gas often was just flared or reinjected. But gas demand is now outpacing supply in some localities, and gas is becoming much more transportable through LNG technology and long-distance pipelines.
Geography certainly will help spur development of an international gas market. Three-fourths of proven gas reserves are located in the former Soviet Union and the Middle East, but gas demand is rising rapidly in North America, Europe, China, south Asia, and Latin America. Russia will play a key role in this development because of its location and reserves, and because it is one of the earliest major gas exporters to Europe. Qatar intends to become a major LNG supplier to Asia, North America, and Europe, and it has huge joint-venture projects under way with ExxonMobil and ConocoPhillips.
But as a Rice U. Baker Inst. study recently pointed out, the global growth and use of gas is not a given. Its development will depend in part on governmental regulatory frameworks for production and distribution that private companies can live with, on how quickly reliable markets develop, and on whether gas trade will have something approaching the liquidity of oil trade. Also critical will be how gas is viewed in the ongoing debate about climate change. Technological expertise likely will develop faster than markets, which will slow the pace of overall consumption. But it certainly appears that the natural gas business is on the cusp of tremendous growth over the next 2 decades.