The Role Of Natural Gas
Peter Voser, CEO, Royal Dutch Shell
The world faces the long-term prospect of a surging demand for energy. Growing population and prosperity in developing countries will require a massive expansion in energy sources. National oil companies (NOCs) and international oil companies (IOCs) can address this challenge by forging value-driven partnerships that look beyond short-term economic and political volatility. These partnerships can drive rapid progress towards a secure and sustainable global energy system. And a key part of that system will be based on natural gas.
Thanks to technical advances in the production of tight gas, shale gas and coal-bed methane, total worldwide recoverable gas resources are now estimated to be equal to 250 years of current gas production. The International Energy Agency’s new gas scenario forecasts that, between 2008 and 2035, primary natural gas demand could increase by 60 per cent globally. We at Shell see three major opportunities for NOCs and IOCs to increase the global gas supply by exploiting tight gas, LNG and associated gas.
Shell estimates that three-quarters of the non-associated gas in the Middle East is sour or found in tight reservoirs – or both. These are technically challenging resources to develop safely and profitably. They push the boundaries of innovation. We at Shell know first-hand how the development of tight-gas resources transformed the energy outlook for North America. Now is a perfect opportunity for IOCs and NOCs to work together to replicate this success in other parts of the world.
LNG demand is growing in line with the gas import needs of the Middle East and Europe as well as of China, India and a clutch of other Asian countries. In response, global LNG supplies will continue to expand. Moreover, LNG is fast becoming a truly global commodity, supply matching demand as they shift around the world. With an integrated IOC’s access to a global customer base, more gas-resource holders will obtain the full value of their resources in the international marketplace.
Because associated gas is tied to oil production, its supply is difficult to manage. A producer nation can find itself with more gas than it needs. Sometimes, for a lack of alternative, the gas is flared. But there is real economic and environmental value in capturing associated gas instead of flaring it. A good example is the Gbaran-Ubie project, executed by the operating company of our joint venture with the Nigerian National Petroleum Corporation. The project captures associated gas and converts most of it into LNG for export. The remainder is used to fuel power plants, bringing electricity for the first time to many people. The project also strengthened the capabilities of many Nigerian businesses.
The technical capabilities of NOCs are first-rate; their people are immensely skilled; and they are fast expanding their international reach. But IOCs bring complementary capabilities to projects that can propel the growth of the global gas market. By extending and accelerating the natural gas revolution, NOC-IOC partnerships have a chance to make an immediate impact in the world’s quest for more and cleaner energy. And they would generate significant economic growth for resource-holder nations and their people.