What’s the global impact of LNG experts from USs gas boom? – By Dr. Theodore
Doha / QATAR: Expectations that the US would become a major importer of LNG has been replaced by the possibility of the US becoming a major LNG exporter. As a result of a largely unforeseen surge in shale gas production, North American natural gas prices collapsed from over $10 in 2008, to under $3 at various times during 2012.
However gas prices in Asia and Europe remain strong, creating huge spreads above US prices. A number of more than 20 LNG export projects have been submitted to the US Department of Energy for approval and the proposed projects represent approximately 27bcf/daily of LNG export capacity. Each world scale LNG plant requires a multi-billion dollar investment to build, so I believe that the project developers, regulators will be very skeptical regarding the potential impact of LNG exports. To provide you with some insights to this we should see first on the impact of US LNG to the US domestic market. Second the impact of LNG exports to Asian markets and lastly to Europe.
Come to the first point we have to analyze all potential economic consequences for US …become almost energy self-efficient? What will be the effect on power generation industry? What will be the effect on transportation? What will be the effect on petrochemical and chemical industry?
I strongly believe that new discoveries will increase the incentive to use gas-fired generation instead of oil-fired generation. Oil most probably still remain the dominant fuel in the transportation sector for long period of time. The petrochemical industry will become globally competitive with the low and stable NG price, as the industry is basically sensitive to feedstock’s price. So, soon will see the industry to shift completely to its feedstock from naphtha to ethane because of the ethane-rich natural gas discoveries. The ethane price advantage makes ethylene an apparent beneficiary. We will see an increase of LPG production, which is one of the by-products from Natural Gas liquids. As overall LPG imports and exports in the US is nearly balanced, but total volumes of exports are higher than imports.
Although these highly speculative questions depend in part on actions of parties that do not always act according to free market principles, but mainly based on political and business diplomacy dimensions. Especially for Qatar, the Country has a very well established NG industry, with high productivity and safety standards and anyone wants to build an industry with the same structure should be ready to pay twice as much for the infrastructure now as overall cost have been considerably increased.
Shale gas maybe isn’t good news for North African countries members of OPEC (esp. for Nigeria, Algeria, Angola) and non-OPEC members such as Ghana and S. Sudan, as US has drastic;;y reduced its oil imports from Africa. All these African countries need high oil prices to support high local spending. I give you an example; US imports from Nigeria were more than 1.mb/d and now is less than 400,000b/d and exports from Angola to US dropped by 40%. The worst effect maybe is in Africa.
There still many significant issues to be analyzed of the potential effect of the shale gas to the entire energy mix, and I am not convinced that we will see remarkable changes due to potential ‘’Shale Gas Revolution’’ in midterm, mainly because there some many concerns and uncertainties, which makes it less favorable. I can share my positive thoughts that may it contribute to the energy security of supply, possible lead the technology or maybe water the flower of energy innovation with more energy initiatives.
By Dr. Theodore