SPE Member

Abstract

Worldwide natural gas consumption has increased over the last ten years, but the gains have been regionally uneven. Growth rates have been high for Japan and Australia, as well as for many developing countries with gas discoveries of their own., But the U.S. fell to a twenty-one year low in 1986 and gas markets have stagnated in such important European markets as Germany, France and the Netherlands. The effect of disparate regional demand patterns on international gas trade, especially LNG, has been to reduce expectations well below those of the early 1970s.

While proved gas reserves worldwide compare favorably to those of oil, many gas discoveries are remote from consuming markets, and thus costly to commercialize. Less than half of the world's total gas reserves are dedicated to specific local or export market outlets. An equally large quantity of gas may also be classified as exportable surplus — large enough to support an export project, but with no market outlet yet available. Since new export commitments are not growing as rapidly as gas discoveries in major export regions, the exportable surplus category is steadily increasing.

Introduction

While world oil consumption was declining by 3.5 percent between 1977 and 1986, world natural gas consumption increased by 29 percent. But despite this appearance of growth at the expense of oil, the gains which natural gas has made in world energy markets have been regionally very uneven. In the United States where gas has historically held a high share of energy markets, demand has declined in absolute terms over the period. in contrast, japan, growing from a very small base, has more than trebled its usage. By far the largest increment of growth has come in the Soviet Union whose proved reserves of natural gas constitute nearly 43 percent of the world's total and where an aggressive program of gas utilization has made the Soviet Union one of the world's most gas-intensive economies. And a surprisingly high percentage of growth has occurred in the LDCs throughout the world where local gas discoveries are increasingly being utilized for local industrial development.

CONSUMPTION

This growth pattern highlights one of the main characteristics which distinguishes natural gas from oil. Because of the high costs of transportation, most gas is still utilized within the country in which it is produced. As a result, the international trade of natural gas is relatively small compared to trade in oil. While it is always difficult to generalize about gas and oil transportation economics, representative costs for moving gas in a large modern pipeline system might be 4-5 times as much per million Btu as for oil. But the costs of transporting gas over ocean routes typically go up while costs of tanker-borne oil movements go down. Thus, over some ocean routes, it may cost twenty times as much to move gas as it would a comparable amount of oil.

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