Abstract

The international gas industry will come of age in the 1990s. Gas demand is currently exhibiting an average rate of growth significantly greater than that of oil. Growing environmental concerns, the availability of significant volumes of undeveloped natural gas reserves discovered in the past decade, and the dramatic changes in the socioeconomic-political arena (leading to the global privatisation effort currently in progress) have set the stage for the natural gas industry into the next millennium. The future prospects for the international gas business are now sufficiently attractive to warrant serious consideration by all significantly-sized petroleum companies. The business opportunity spectrum for gas encompasses exploration, development, production, transmission, marketing, liquefied natural gas, electrical power generation, primary petrochemicals and automotive transportation. The development of appropriate strategies to capitalise on such opportunities depends mainly on the nature of the company pursuing the opportunity, the nature of the opportunity and/or the number of opportunities pursued. Also important are potential political, legislative and environmental developments.

Some of the more far-sighted companies are positioning themselves to participate actively in this rapidly growing sector, generally via a strategy of integration along the value-added chain. In this respect, the knowledge and expertise base required of such participants, if they are to establish profitable business activities, is much more extensive than that required of typical oil companies. The competitive advantage in this capital-intensive, long leadtime business sector lies with integrated companies with proven experience in all phases of gas operations. Companies without an effective, comprehensive strategy are unlikely to make any significant progress in the sector in the medium term unless they are prepared to pay large acquisition premiums. This paper reviews the anticipated evolution of the natural gas business, the major developments contemplated, and political, corporate and financial considerations.

Introduction

The 1980s proved critically important for the international gas industry. During this decade gas demand exhibited an average rate of growth an order of magnitude greater than that of oil. The future prospects for the international gas business are potentially even more attractive, although, regionally some differences are anticipated. During the next two decades, in energy equivalence terms, the gas business is expected to grow much faster than the oil business, so that at some stage in the period 2005–2010 world gas demand will begin to exceed oil demand. In the anticipated environment of sluggish demand for oil and accelerating demand for gas, companies would be imprudent to ignore the potential of the gas business, a potential which is analogous to that which prevailed in the oil industry during the 1960s/1970s. Indeed, there are signs that some of the more far- sighted companies are positioning themselves to participate actively in this rapidly growing sector. The situation with regard to gas varies regionally but, it is becoming apparent that the industry is increasingly acquiring a broader international dimension. Probably the most important factor influencing gas demand projections is the potential volume of gas required for electrical power generation. This is a critical factor in virtually all countries.

The recent and continuing socio-politico-economic changes in Latin America, Eastern Europe, the former Soviet Union and in Asia-Pacific have assisted in improving the prospects for the gas business but the influence of these developments is somewhat secondary to the effect of economic and environmental pressures. Nevertheless, the global political changes have expanded geographically the size of the potential market for companies. Opportunities for companies exist in exploration and production, pipeline transmission, marketing, liquefied natural gas (LNG) electrical power generation and equipment manufacture. The development of strategies designed to capitalise on such opportunities depends largely upon the nature of the company pursuing the opportunity, the nature of the opportunity and/or the number of opportunities pursued.

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