Saturday, September 12, 2009

The Emerging Global LNG Market

Gorgon's Fate Takes Shape
LNG Supply Deals Move Chevron Closer to Gas-Field Decision

(Editor's Note:  With the development of huge natural gas finds such as Gorgon, an efficient world market for Liquified Natural Gas (LNG) will finally emerge, presenting an energy alternative to oil.)


A huge project to tap natural-gas reserves in a remote corner of Australia promises to cement the nation's status as a major energy producer and underscore Asia's emergence as the key growth market for the oil-and-gas industry.

Chevron Corp. and its partners, Exxon Mobil Corp. and Royal Dutch Shell PLC, will announce within days that they have given final approval to the project after years of delays, people in the industry say. The project will produce gas from fields off the Australian coast, super-cool it to convert it to a liquid, and ship it to customers around the world.

The decision to go ahead with the project, known as Gorgon after the offshore field where the gas will be produced, highlights how energy companies are counting on rebounding demand from Asia to lift their fortunes as the recession has cooled the global thirst for oil and gas.

Even by the standards of Big Oil, Gorgon is huge. The project will tap into 40 trillion cubic feet of gas, the equivalent of 6.7 billion barrels of oil. The companies have declined to discuss the price of the project, but government and independent experts have estimated the total cost to bring the project into production could amount to more than $40 billion, making it one of the world's most expensive energy projects.

Gorgon is expected to deliver its first gas shipment in 2014, more than 30 years after the field was discovered.

The new supplies from Gorgon and other projects in Australia could lead to a fundamental shift in the way gas is priced throughout the world. As more natural gas travels by free-ranging ships rather than immovable pipelines, traditional regional price differences could begin to erode as big buyers such as China gain more power to negotiate prices by playing competing suppliers against each other.

"We're seeing the first stages of what will ultimately be a more global natural gas market," said Mark Gilman, an analyst with Benchmark Capital in New York.

Blanace f article: The Wall Street Journal

No comments: