Abstract:

High gas prices over long periods of time will of course affect interfuel competition to the benefit of coal, nuclear and alternative energies. But environmental concerns and the superior economics of combined cycle gas turbines in power generation will for the foreseeable future keep the competition to gas at bay.

Though certain emerging markets will see the highest gas consumption growth rates, North America and Europe will likely see the biggest increments in gas use. Indigenous North American and European gas supply will hardly grow at commensurate rates, judging by the signs that US L48 production is leveling off and that UKCS production is heading for decline. This will cause rapid growth in international gas trade in general and intercontinental gas trade in particular. The international oil and gas companies are prepared for the challenge, and with gas reserves in ample supply and LNG costs coming down, gas shortages, price spikes and long term demand destruction do not need to occur.

Considering the distribution or world gas reserves, importing countries will likely become increasingly dependent on the same small group of exporting countries for their gas supply as they now rely on for their oil supply. This outlook raises certain supply security issues.

In response, IOCs must be enabled and incentivised to reinforce E&R in the world's remaining underexplored areas. Statoil has in this respect a particular interest in the Arctic waters off North Norway. Moreover, the emphasis on cooperation at all levels, transparent regulation and supply risk management through, for instance, supply route diversification need to be further strengthened. Finally the remaining tensions between the merits of gas market liberalization and the importance of secured long term offtake for the realization of increasingly long and complex supply chains, need to be worked out.

INTRODUCTION

The global demand for energy is increasing and is expected to increase at a considerable pace over the next 25 years. The International Energy Agency, IEA forecasts an increase from 10350 million tonnes of oil equivalents in 2002 to 16490 by 2030, (Figure 1).

The price developments we have seen over the last few years are clear signals to that effect. Looking back in time, we can conclude that natural gas has been a winning fuel in terms of relative growth. The general consensus in most predictions today is that gas also represents an important growth component in the future. It might outpace coal over the next decade.

(Figure in full paper)

In the Year Book of 2004, the IEA summarises the expected implication for natural gas in the following way:

  • Consumption of natural gas world wide will double between now and 2030

  • Gas resources can easily meet the projected increase in global demand

  • Inter-regional gas trade will triple over the period from now until 2030

  • Gas-to-liquids plants will emerge as a major new outlet for natural gas

  • Cumulative investment needs for gas-supply infrastructure in the period will amount to $2.7 trillion or $100 billion per year

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