So tragic to have non-accretive bids at this critical time.....
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Players work to meet supply gap
By Jennifer Pallanich & Erik Means
16 April 2013 22:22 GMT
"The biggest challenge facing all of us is really what will it take for buyers and sellers to get together to make sure that we have enough supplies coming into the market to meet demand,”Gagea told an audience of the Global Strategy Forum at the LNG 17 conference in Houston.
Speaking on Tuesday, Gagea said natural gas “is becoming the fuel that most economies go to first to meet their economic needs”.
He pointed out that global demand has doubled since 2000 and is poised to double again by 2025. “That’s only 12 years away,” he stressed.
“That’s another 250 million tonnes that need to come to the market. We have about 100 million tonnes under construction right now. There is still a gap by 2025 of 150 million tonnes. Where is it going to come from?”
The 150 million-tonne gap forseen in 2025 “is actually 10 times Gorgon”, he said, referring to Chevron’s giant LNG development project in Australia.
"Gorgon is costing us about $50 billion – that’s a tremendous amount of capital intensity that needs to come to the market. Where is it going to come from?”
Geagea said Chevron has been encouraging the buyers to diversify.
“We’re telling the customers to get equity in the upstream as well. It’s only through partnership between buyers and sellers that we can adequately supply this market.”
One area of improvement, according to Geagea, will be to bring down the time it takes to bring LNG projects to fruition.
“The last 35, albeit conventional, LNG projects that have been developed, took on average 18 years from exploration to first LNG,” he said, a number already coming down significantly.
“The worst thing you can do is to defer supplies coming into the market, because that has the unintended consequences of driving prices exactly in the opposite direction as the buyers have been asking,” Geagea told delegates.
“The key is affordability. How do you get affordability? You do simple economics. Let demand be met by supplies. Don’t put policies in place that prevent supplies from coming to the market.”
Richard Guerrant, vice president of ExxonMobil Gas & Power Marketing, said policies of importing and exporting countries are another key challenge facing the LNG industry.
For instance, the US is transitioning from an importing country to an exporting country, which has “stirred up a debate” about protectionist trade policies, Guerrant said during the Global Strategy Forum at LNG 17.
Another challenge, he noted, is an increasingly tight market.
Guerrant referred to forecasts that LNG demand of 200 million tonnes per annum in 2010 will triple to 600 mtpa by 2040, with 75% of that earmarked for Asia-Pacific destinations.
By 2025, he said, LNG demand is expected to overtake coal.