Asia's Thirst for Natural Gas Fuels Investment Opportunities
A demand slump and massive downsizing efforts may have cast a long shadow over the global economy, but companies involved in natural gas services have reason to remain optimistic as the gas industry embarks on a rapid growth phase, most notably in Asia.
Meanwhile, world gas demand is projected to increase rapidly from 2011 to 2017, said International Energy Agency's (IEA) Senior Gas Expert Anne-Sophie Corbeau at the Business Media China (BMC) high-level event – China Natural Gas Summit 2012 – which took place in Beijing Nov. 14.
In her address, Corbeau noted that global gas demand will grow by 2.5 percent per annum from 2011 to 2017, reaching 576 billion cubic meters (Bcm) by 2017. The regions that will experience a surge in demand are Africa, the Middle East, Latin America and Asia, Corbeau said. Each of these regions will see annual growth rates ranging from 3 to 5 percent.
Corbeau pointed out that China will emerge as the leading importer of natural gas among the emerging economies, as the country's demand growth over the period 2011 to 2017 will average at an impressive 13 percent per annum.
"China is already the fourth largest gas user, behind the United States, Russia and Iran. But the country is soon expected to become the third largest gas user as it embarks on a remarkable growth of gas demand," Corbeau said.
Factors Fueling Asia's Natural Gas Demand
China's natural gas demand growth, driven by unabated urban-rural migration, will focus on three areas; electricity generation, industrial and urban fuel gas and chemical production, Jiang Xinmin, Deputy Director at the Center for Energy Economics & Development Strategy - a division under Energy Research Institute - led by the National Development and Reform Commission (NDRC), said in a separate address at the summit.
Aside from traditional industry uses, Jiang noted that China will see an additional demand boost from non-reliant industries such as the transport sector. In early October, the NDRC unveiled a natural gas policy designed to spur the transport sector's use of the cleaner-burning fuel, particularly liquefied natural gas (LNG). Besides homes, utilities and factories, the Chinese government for the first time targeted the transport sector covering buses, taxis, trucks, passenger vehicles and vessels as preferred users of natural gas.
Speaking at BMC's China Offshore Engineering Symposium, which ran simultaneously with the natural gas summit, Douglas-Westwood's Associate Director Jason Waldie presented data which lent support to Jiang's observation on China's policies.
Waldie noted that there is a strong correlation between gross domestic product growth and energy consumption, which implies that China and India will account for the mammoth share of energy usage over the next decade as these two regions are clocking high GDP growth rates. Douglas-Westwood's data revealed that China will be home to approximately 120 million new cars by 2015. As a basis for comparison, this figure surpasses the combined passenger vehicle requirement for UK, France and Germany.
Jiang also gave his projections on China's natural gas demand. He said that the country's gas demand will exceed 230 Bcm by 2015, similar to Corbeau's estimate.
Japan is meanwhile moving up quickly along the gas demand curve as the country shifts its focus onto importing more LNG for power generation in the wake of last year's Fukushima disaster, the worst atomic accident to occur in a generation.
Tokyo, in an apparent bow to public pressure, announced in September it will strive to cut its use of nuclear energy to zero. A research paper published Jul. 3, by it will strive to cut its use of nuclear energy to zero. A research paper published by the Institute of Energy Economics Japan (IEEJ) revealed that out of the 50 nuclear power stations in the country that ceased operations this year, only the Ohi Nuclear Power Station Units 3 and 4 of Kansai Electric Power Company will be restarted.
Japan's LNG import landscape has since changed dramatically after it became apparent that Tokyo will favor natural gas-fired thermal power generation as an alternative to using nuclear power. The Japanese government has also set a mandate for Japanese power plant operators to boost their usage of renewables – energy that comes from natural sources – in the longer term.
PFC Energy's Senior Manager Jamie Webster spoke about the Japanese impact on Asia's natural gas market in the summit. If Japan assumes a balanced approach – which incorporates coal, biomass, oil and renewables in its power generation fuel mix – the country's gas demand could reach 9.7 billion cubic feet (Bcf) , added Webster.
However, if the country assumes a high gas reliance approach – having a fuel mix skewed heavily towards gas – the country's gas demand could surge to 10.4 Bcf in 2030.
Opportunities for Rig Builders, Gas Services
At present, there are 13 world-scale LNG projects being built globally, of which seven are sited in Australia. For the seven LNG projects in Australia, Gorgon, Prelude, Wheatstone and Ichthys in Western Australia, and Queensland Curtis LNG (QCLNG), Gladstone LNG (GLNG) and Australia Pacific LNG (APLNG) in Queensland, the race is on to drill more gas exploration wells. All of Australia's LNG projects have a strong export focus, with several of these projects having already inked long term LNG supply contract agreements with Japanese, South Korean and Chinese buyers.
Shell made the final investment decision to proceed with the development of its Prelude FLNG project in May last year. Once operational in 2017, the facility will produce at least 5.3 million tonnes per annum (mtpa) of liquids (3.6 mtpa of LNG, 1.3 mtpa of condensate and 0.4 mtpa of LPG). It will also be the largest floating offshore facility in the world, displacing some 600,000 tonnes and being more than 1,600 feet long and 240 feet wide.
Besides Australia, other countries such as Malaysia and Indonesia are also looking to develop large-scale gas discoveries. State-backed Petronas announced Monday that it has made two major gas discoveries offshore Sarawak, which combined could contain over 4 trillion cubic feet of natural gas, offshore Sarawak. Petronas stated in a statement emailed to Rigzone that it is embarking on subsequent work to estimate the range of recoverable resource volumes. Meanwhile, Indonesia had recently given the regulatory nod to BP for its expansion plans – worth $12.1 billion – for its Tangguh LNG project in the Papua Barat province in eastern Indonesia. Both Malaysia and Indonesia also export LNG to Japan and South Korea.
These gas-centered projects could mean large opportunities for the subsea industry moving towards 2012, through 2016. Waldie noted that globally, the number of subsea wells drilled will rise from 904 in the 2007/11 period to 1,484 in the 2012/16 period.
In the Douglas-Westwood survey of 30 exploration and production companies, around $11.3 billion per year will be spent on mid-sized projects in relatively shallow waters, with the Asian region accounting for 43 percent of global offshore wells drilled over the next five years, Waldie added.
Waldie also said in his address that Asia Pacific is expected to dominate the FLNG market, with Australasia bagging a large chunk of investment dollars.
Douglas-Westwood estimated in 2010 that over $23 billion would be spent on FLNG development from 2010 to 2016. During this period, Australia is expected to dominate the FLNG market with $5.3 billion in projects, followed by Africa with $5.2 billion in projects and Asia with $4.7 billion in projects.
Besides Shell, other companies seeking to develop liquefaction FLNG facilities include Flex LNG, Petrobras, SBM Offshore, Bluewater, Hoegh LNG, Excelerate Energy, ConocoPhillips and Sevan Marine are developing FLNG liquefaction design concepts.
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
More from this Author
Most Popular Articles
From the Career Center
Jobs that may interest you