Oil majors stepping to forefront of LNG
reuters.com
Wed February 11, 2004 03:53 PM ET
By Matt Daily and Joe Giannone
HOUSTON, Feb 11 (Reuters) - The scramble for a piece of the rapidly growing liquefied natural gas (LNG) business has attracted dozens of energy companies, but the world's biggest oil companies remain the best suited for making the huge investments in the growing field, company executives and analysts said on Wednesday.
"We are looking at an additional $100 billion of investment required over the next 10 years to deliver the required LNG flows," Malcolm Brinded, managing director for Royal Dutch/Shell Group (RD.AS: Quote, Profile, Research) (SHEL.L: Quote, Profile, Research) , said in a Cambridge Energy Research Associates conference presentation.
Shell, ExxonMobil (XOM.N: Quote, Profile, Research) , ChevronTexaco (CVX.N: Quote, Profile, Research) and BP Group (BP.L: Quote, Profile, Research) have all moved heaviliy into the LNG markets, securing supply deals from gas-producing projects and establishing import footholds in the industrial countries hungry for gas.
"The big companies like ourselves (and the other majors) are going to be the ones with the supplies and the money to do these things," John Gass, president of ChevronTexaco's global gas business told Reuters.
The technology for LNG requires super-cooling natural gas to a liquid form, loading it into specially designed tankers for transport, and regasifying it at a terminal where it can enter a pipeline system.
The technology, which has existed for decades, has in recent years grown much cheaper, with total costs dropping by about two-thirds in the past 30 years and shipping costs alone down by 50 percent since 1990, Brinded said.
"For the first time, conditions are right in the all the major gas import markets of the world - North America, Asia and Europe," Brinded said.
The United States is the hottest market for LNG, since its four existing import terminals can bring in only a fraction of the gas the country is expected to need as gas demand surges and North American production stagnates.
That has attracted interest from gas producers in the Middle East, Africa, Asia and Australia who are eager to ship to the country where some 40 new terminals plants have been proposed.
Only a handful of those U.S. terminals will be constructed, experts say, largely because of the large sums of money needed for development and to secure supplies from producers.
"The number of players who can bring off these projects, because of their size and because of their complexity, is fairly small," Michael Stoppard, a CERA director, told the conference.
Smaller companies are not likely to find willing lenders for U.S. projects in the financial markets, since many of those lenders have been burned by investments in the merchant power sector, he added.
Oil majors are accustomed to spending billions of dollars on investments, giving them the advantage in developing the U.S. business as part of their global expansion in the business.
"We're ponying up with big bucks to do it," Ralph Alexander, BP's chief executive for gas, power and renewables, told journalists.
Unlike the oil business, putting together the complete LNG chain to bring gas to market in the current environment may require the leadership of a major oil company.
"You need commercial contracts. You also have joint ventures, with lots of different parties in there ... Some parties need financing (and) that's a complication. It's just a whole realm ofthings that makes the LNG business different from the oil business," Gass said. |
