Will natural gas replace oil?
Natural gas is becoming more and more abundant, and at the same time,
much cheaper. Also its distribution has become increasingly global, it can be
shipped around the world much like oil with the LNG ocean tankers.
For these reason gradually it will replace oil in much of our everyday
lives, particularly transportation and heating.
Althoug this will not happen immediately, natural gas could be a
distruptive technology.
It could become the hydrocarbon of choice for the entire world for much
of what we now use oil for. And in addition it is much cleaner
than oil.
As it is known, natural gas may be cooled down to -160 degrees Celsius,
and not only does it turn liquid, it reduces in volume 600 times.
LNG is 1/600th the volume of regular natural gas.
It is now shipped from continent to continent in tankersin that condensed
form. When it reaches port, it goes into a special LNG terminal, is
heated up to normal and ready to go into a pipeline.
For this reason the countries that possess natural gas fields are in a
much better economic position. This is the case of Qatar and Iran, with their
large field in the middle of the Persian Gulf, and the case of Russia which is
exporting large quantities of natural gas to Europe. In Bolivia the natural gas
production has increased considerable, and today the country has significantly
improved its economic situation.
LNG is not yet a big factor in the US market, counting for some 3% of
its use. And because of all the low cost, abundant shale gas discovered
in the last few years, it is unlikely LNG will ever be needed much here.
LNG terminals are being built around the world, especially in
Asia. The four big countries in LNG are Russia, Iran, Qatar and
Indonesia. RBC Capital Markets estimates global LNG production will
increase over 30% in the next two years, or just under 10 billion cubic feet
per day (bcf/d). All the shale gas in the US has increased production there by
the same 10 bcf/d since 2002. So the new LNG supply is the same as
adding 3-4 major shale gas plays.
One important thing to note is that governments are big players in these
LNG infrastructure projects that cost billions, and they need money for social
services. So LNG infrastructure will not get turned off during a regular
price downturn at the bottom of a business cycle. It will keep producing
and shipping except under real economic duress (though we have had some of that
lately!)
Qatar, for example, basically has a zero cost on
its LNG, because of byproduct credits – other natural gas liquids in the mix.
This means that the money Qatar makes on those other liquids pays for all the
costs associated with the natural gas. While shipping and freezing/thawing the
gas does have a cost, the point is the increasing new supply is fairly cheap
gas by recent North American prices (RBC estimates $3-$4/mcf).
(to be continued)
Ref.
https://oilandgas-investments.com/2009/natural-gas/could-natural-gas-replace-oil/
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