BP Review of Global Gas Industry Shows Growing Clout of LNG, Shale Gas

---

Researched by Industrial Info Resources Australia (Perth, Australia)--Global reserves of natural gas were calculated at 7.36 trillion cubic feet by BP plc (NYSE:BP) (London, England) in its 2012 Statistical Review of World Energy. BP says this is enough to meet another 63.6 years of production, making it the ideal fossil fuel for efficient, clean energy creation.

The delivery of natural gas from its point of production to its place of use is becoming increasingly crucial. While seaborne liquefied natural gas (LNG) is gaining in market share, pipelines still deliver 90% of global gas. Traditionally, pipelines have been the delivery method for the important resource, frequently traversing great distances and often crossing borders.

Whether it's the planned Trans-Saharan Pipeline in North Africa, the Dampier-to-Bunbury Natural Gas Pipeline (DBNGP) in Western Australia, or the Iroquois Gas Transmission System that transports natural gas from Canada to the U.S., the transportation of natural gas from the wellhead to the end user is a complex and expensive task. The world's longest pipeline, which became operational in June 2011, transports gas from Turkmenistan to Southern China, to supply the industrial zones in Shanghai, Guangzhou and Hong Kong.

Seaborne transportation of LNG is not a new concept. The Methane Pioneer was the world's first LNG carrier and began crossing the Atlantic with LNG cargo in 1959, but the last decade has seen huge growth in the use of LNG transport ships, which have filled the gap in the market to which pipelines were unable to cater. Originally led by the small state of Qatar, about 20 nations have built LNG fleets and created the export and import terminals for its delivery.

"LNG has become an increasingly important supply source in meeting the world's energy needs," says Andrew Walker, BG group's head of LNG Strategy. "Of all natural gas consumed in 2011, 10% was transported between producer and market in the form of LNG."

He said that in 2011, total trade had increased nearly five times from the 1990 level, to just over 240 million tonnes. "There are 18 exporting countries and 25 importing countries spread worldwide, with many more aspiring to enter the market. We have seen the emergence of new technologies, including shipboard regasification and floating production open up new markets and new supplies, respectively. In short, LNG has been instrumental in driving the globalization of the international gas trade."

Now, much the same way that seaborne LNG transport transformed the industry, the emerging shale gas industry is set to change the landscape again. This time led by the U.S., the extent of the volumes of natural gas available to U.S. shale producers has game-changing implications. Many believe it is now a matter of when, not if, the U.S. begins exporting LNG. However, the construction of export terminals will take years and billions of dollars.

The possibility of the world's largest economy becoming an exporter of LNG has major implications for the global LNG market. Qatar has traditionally been the largest exporter of LNG in the world, but this position is threatened by Australia, which is expected to see large-scale LNG projects under construction come online in the next few years, and the U.S., which will enter the market at some point in the future.

To expect the dominance of pipeline gas to diminish in the future seems obvious. However, how quickly that happens will depend on how well global gas producers can balance increasing infrastructure costs and falling prices as a result of the increased availability of shale gas.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.