Shale natgas will not remove need for LNG - executives

17 March 2010 21:08  [Source: ICIS news]

SAN ANTONIO (ICIS news)--The recent spike in natural gas production and high reserve expectations for US shale fields will not deter the need for liquefied natural gas (LNG) in the US, industry players said on Wednesday.

“LNG will continue to play a large role in the global gas market,” said David Steely, director of LNG marketing and origination with BP. He was speaking at the CWC World LNG Series - Americas Summit in San Antonio, Texas.

LNG represents 10% of the global gas market, Steely said, representing 30bn cubic feet (bcf)/day.

The US will still be a destination for LNG despite rising rig counts and output from tight rock shale fields.

A few years ago, US natural gas imports were predicted to be 4,000-7,000 bcf/year by 2030.

The most recent estimate from the US Energy Information Administration (EIA) has dwindled to less than 1,000 bcf/year, according to Guy Caruso, senior advisor at the Center for Strategic and International Studies.

But Hilde Nafstad, president of the natural gas division of Norwegian oil and gas company Statoil, said there is room for shale and LNG in the US.

“There will still be a gap needed for imports,” she told the conference in San Antonio.

Statoil operates the 1 bcf/day Cove Point LNG terminal in Maryland, bringing in gas from northern Norway.

The company also invested in US shale gas two years ago when it purchased just over 30% of US independent producer Chesapeake’s stake in the Marcellus field located in the northeast US.

Recently, the company secured pipeline capacity to send its Marcellus shale gas to areas around New Jersey and New York City.

And the company expects to be a long-term gas provider to the northeast US by using both its shale and LNG assets, Nafstad said.

The shale gas revolution has put LNG on the backburner of the burgeoning natural gas industry, but there are shale sceptics.

Unconventional shale gas is expensive to produce. With futures prices mired below $5/MMBtu - and breakeven prices anywhere from $3-6/MMBtu - industry watchers are questioning how long shale producers will run rigs.

The pricing of LNG versus shale gas will shape which one gains better footing with US buyers.

“The flow of LNG will be directed by the price in the US,” Nafstad said.

Gas-deficient Asian nations take roughly half of the LNG cargoes worldwide and Europe receives nearly 10%.

“Asia will get whatever they want, and the same with Europe,” Steely said about the global LNG landscape. “What is left over will compete into the North American market.”

Petrochemical producers have paid close attention to natural gas pricing, as the large supply levels have suppressed values. That has encouraged petrochemical makers to switch to lighter, natural gas liquid (NGL) feedstocks as opposed to heavier and more expensive crude-based raw materials.

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By: Ryan Hickman
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