Natural gas has gone the full transformation from nuisance to necessity. This 180 degrees transformation is due in part to government policy, technology, reserves and an open business model.
Development in the US
Natural gas "associated" with oil was a nuisance for oilmen who vented and flared the hazardous byproduct. However, enterprising businessmen soon saw the possibility of transporting it by primitive pipes to nearby industrial centres. Its broader use remained constrained by the technical difficulties associated with transporting natural gas over long distances. Advances in welding, metallurgy, and compression technology in the late 1920s and early 1930s brightened the prospects for gas. However, things changed by the early 1970s as US policy-makers worried that gas was becoming scarce and began imposing controls on its usage and pricing. This action weakened the incentive to look for new gas supplies.
Development in the rest of the world
In Western Europe, Italy made the first move to gas with discoveries of natural gas in the Po Valley during the Second World War, developing the largest gas market in Western Europe by the mid-1960s.
The 1959 discovery of the massive Groningen gas field in the Netherlands set the stage for rapid growth there. The impetus for increasing the role of gas in the energy supply was enhanced by the 1973 Arab oil embargo. The economies of Japan and Western Europe at the time ran mainly on imported oil. The shortages and spiking prices that resulted from the embargo sent many countries to diversify away from Middle East oil.
Gone Global
Pipelines imposed severe limitations on the international trade in gas. By nature, pipelines are economic for trade over relatively small (<3,800km) distances. Thus, markets developed through pipeline links were regional in scope. Gas definitely went global with the development of Liquefied Natural Gas (LNG), which allows gas to be shipped economically over very long distances, and the introduction of a flexible business model that encourages arbitrage between pipeline regions.
Open Business Model
Improved LNG technology, which resulted in lower shipping cost and a shift toward price deregulation and privatisation of natural gas businesses around the world spurred LNG to be a more flexible, competitive, and entrepreneurial business. The chain of infrastructures for delivering LNG-production, liquefaction, shipping, and regasification-did not necessarily require a single integrated operator.
The Growth of Natural Gas
Natural gas increased from roughly 16 percent of world primary energy demand in 1973 to about 21 per cent in 2010 according to International Energy Agency (IEA), and is now produced and consumed in more than 43 countries around the world. Its versatility, abundance, cost competitiveness, efficiency and environmentally friendly properties have made natural gas the fuel of choice for a wide array of uses.
Global Natural Gas Reserves
Proven reserves stand at 187.5 Tcm or about 65 years at current production levels. This suggest that scarcity is unlikely to impede a global shift to gas. The geographical, political and financial barriers to natural gas development will be harder to clear. A high proportion (39.5 per cent) of the world's most prolific gas resources is concentrated in Iran and Russia. These countries are not only remote from major markets such as the US, Western Europe, Brazil, China, India and other areas where demand growth is expected to be strongest, but they are also politically unstable.
Gas Market for T&T
Such uncertainty provides a unique opportunity for T&T to leverage on arbitrage opportunities and on other governments' wish to diversity their energy supply portfolio. This is the primary reason why T&T is a major supplier (43.4 per cent in 2010) of US LNG imports. Where else do other opportunities exist?
At this year's Energy Conference, which will be held on February 7 and 8, and in keeping with Theme "Energy and Investment," the chamber will have experts present models on identifying gas markets and attracting energy sector investment.
For more information visit www.ttenergyconference.org or call 6-ENERGY.