World Energy Congress told of LNG slowdown

Monday, 12 November 2007

Executives from Royal Dutch Shell, Gaz de France and BG Group said some countries with current or future LNG potential were giving priority to oil projects, while engineering contractors continued to be in short supply to execute LNG ventures.


“Some countries are now building oil facilities and giving them priority over LNG projects,” said Jean-Luc Colonna, Vice President of LNG at Gaz de France, Europe’s leading importer of LNG.


“There is also the problem facing the industry of the availability of contractors, while some exporting countries also have to think of their own domestic natural gas demand,” said Colonna.


The head of LNG Strategy at BG Group, Andrew Walker, said: “Because of this slowdown it seems unlikely that there will be any excess capacity in the market. LNG supplies will be tight until 2015.”


LNG is also facing pressure because of the high cost of projects and emerging competition from other sources of energy.


“LNG needs huge investment and almost everywhere LNG has a substitute, more than ever projects need long-term commitments to make both purchasers and suppliers comfortable,” said Colonna.


Royal Dutch Shell’s Global LNG Strategy Manager, Jacqueline Redmond, whose  company currently has stakes in six new LNG liquefaction Trains under construction in Australia, Nigeria, Russia and Qatar, said countries also needed to make use of other resources and meet their own domestic natural gas needs.


She pointed to China, to which Shell delivered its first LNG cargo, and the huge Chinese reserves of coal.


“LNG and clean-coal will co-exist in China in the future,” said Redmond, citing the big Chinese coal reserves and the use that will be made by the US for power from its substantial coal reserves. 


The US would also be making use of advances in clean-coal technology, delegates were told, while still "becoming the world No. 1 market for LNG in the next decade."


Walker agreed about the potential of clean-coal technology to provide competition to LNG in at least some markets. However, unlike LNG, the full costs of producing clean-coal still have to be determined, said Walker.


“None of us knows the capital costs of clean-coal, where the technology puts it on the pricing landscape and where we price it,” said Walker.