A rising reliance on gas Natural gas offers a unique opportunity to make a signi ‘ant contribution to reducing reliance on high-carbon-content fuels and its role asa primary energy source is growing rapidly. Resource availability, cost and environmental considerations will increase reliance on gas in industrial applications and electricity generation. By Saulat Rashid Lone, Sui Northern Gas Pipelines, Pakistan }RLD GAS consumption in 2025, at 181 tilion cubic feet (cf), 8 projected to be nearly 60% higher than in 2005 (97 wrillon c), a 2.4% annual increase, according to the US’ Energy Information ‘Administration. The most robust growth is expected in the developing worl, where demand is forecast to tke by an average of 2.9% a year to 2025, primarly for electricity generation. In industrialised countries, where gas markets are more mature, consumption is piojected to rise by an average of 1.8% a year to 2025, wth North America accounting forthe largest share. The disparity between the increased consumption in industrialsed nations and the much smaller rise ‘expected for domestic production means they wil rely 6n imports for more than 30% of gas supply in 2026. In the developing world, prodvction is forecast to exceed consumption by 16.3 villon ef in 2025 ~ in the former Soviet Unicn (FSU), output is projected to ‘ceed consumption by 11.7 trllon cf Intematiora trade wil continue to grow, with partic- uiaty strong growth in the liquefied natural gas (LNG) trade — wth many gas-Supply sources far from demand centres and cost decreases throughout the LNG chain, tho produetis becoming increasingly competitive. Atend-2005, proved world resewes stood at 6,348.4 tilion cf, according to BP's Statistical Review of World Energy. Just over 70% are in the Middle East, Eastern Eutope and the FSU — ussia, Iren and Qatar account for nearfy 58% of the total. The mean estimate for waridvide undiscovered gas is 4,221 tillon ct, Of the total resource base, an estimated 3,000 tition of are standed — either too far from ppeline infastructure ‘or demand centres, or too smal in volume to make Production economical. Despite increased consump- tien, particulily over the past decade, most regional ‘eserves:production ratios have remained high, Cansumption is projected to grow at an average ‘annual rate (AAR) of 1,6% to 2025. The region’s pro duction and consumption are roughly in balance, but 'by 2010, consumption is forecast to exceed output by 2 tilion of, With the gap increasing to almost 5 trl- lion ef in 2020 and 6 tillon cf in 2025, LNG imports wil be essential, particulary for the US. Existing US LNG import plants are expected to be at, 0 close to, capacity by 2007, importing 1.4 tilion cf. However, it © hoped that capacty expansions and row plants ‘cross North America will have the capacity to meet irmoort demands, Canada will remain a net exporter, but output. availa- ble for export will fal. Alberta, which aecounts for mare ‘than 75% of preduction, is forecast to see an aver. age decline rate of 2% a year to 2012. Additionally, increased domestic demand, rising at a rate of 2.2% a yoar, and rocont dhiling discppointmorts — emallar cis ‘coveries with lower production rates and faster decline rates ~ are reducing volumes available for export. Mexican demand is projected to grow at an FAR of 3.9% to 2025, piimarly to fuel power generation. But with output rising by just 2% a year, the county will rely on pipeline supply from the US ard LNG impor. Gas is the fastest-growing fuel source in the region, with demand projected 10 grow at an AAR of 2.0%, to 23.7 tilion of in 2025. With less than 4% of the: ‘world's proved reserves and production in decline, the. region will become increasingly import dependent. n 2001, 31% of sipply was imported; in 2025 imports are forecast to reach 59%. The UK, Germany, Italy, ‘the Netherlands and France are the largest corsum- ors, In 2005, theso countios produced around 6.3 tilion ef and consumed 12.2 trillion ef Between 2015 and 2020, Germany is expected to replace the UK as the region's largest consumer, requinrg 5.6 tlion ety by 2025, in part because of its commitment to phase out nuclear power. Germany receives over 40% of its supplies from Russia and this figure will rise with the completion of the Nort European Gas Pigeline, the first ditect link between the countries, by 2040. The UK is the region's largest producer and consumer, but output is in decline, and the country has retumed to net-importer status. ure 1: World gas reserves, end-2005 tillon om oth America Latin America Western Europe EEwope and FSU ico A Mile Eet Asi-Pacfe 0 10 a m0 «0 50 60 70 a0 Source: edigax Tota 10 World overview ‘Saulat Rashid Lone ® Fundamentals of the Global Oil and Gas industry, 2006 | 19[| World overview 0 Norway, with the largest resenes in the region, at 84.9 tillon of, vill become an important supply source for western Europe. Consuming only about 1.466n cf, the country exports most ofits 3 tllon cfly of output. Norway will become an LNG experter in 2007 when ‘Statol's Snohvit project is due to come on stream, Botwoon 2001 and 2002, Portugal saw a 249% Increase in consumption. Supply comes by pipeline from Algeria and is supplemented by LNG imports Under a 20-year contract with Nigeria LNG. Spanish consumption has nearly quadrupled over the past 10 years. Almost entirely dependent on imports, the country receives over two-thirds of its 4.2 trilion offy of supply through five LNG receiving terminals = a sixth is under constuction, Pipeline imports from "Nonvay and Algeria make up the balance. Turkish consumption has also climbed rapidly ~ ‘more than tripling since 1995 to 0.95 trilion cf in 2005. The country is import dependant, relying on Russia and tran for pipeline supplies, and LNG from Algeria and Nigeria. Production in the region is increasing. Although consumption remains below the levels of the early 1990s, at around 23 trilion cf, its projected to reach 29 villon ef in 2025, growing by around 2.1% a year ‘The FSU holds more than 30% of world reserves and accounts for 28% of global production. With 26.6% Of the world's gas resewves, Russia is the greatest force in gas trade, exporing over 5 tilion cf in 2005 to vestem and eastern Europe - over 28% of total pipeline gas trade. Planned LNG export plants and proposed pipelines to Asa will expand the country’s react, makingit a global player. ‘The region holds 4.1% of the world's proved reserves, ‘about 250 trlion cf. Consumption is projected to grow by 38% a year to 8.5 tilion of in 2025. The largest reserves are in Venezuela (152 tilion cf, with Trnidad ‘and Tobago, Bolivia and Argentina all with reserves around 20 tuilon cf. Regional production is sufficient to meet demand, but recent political developments Figure 2: World gas output/consumption, end-2005 tem North America Latin America Miestrn Europe Europe and FSU a ‘tak: 20¥ilion om Middle Cost ae? consumption Asia-Pacic 0 200 400 600 a00 1,000 Source: edgar Fundamontals ofthe Global Oil and Gas industry, 2006 in Bolivia, which has re-nationalised its industy, has forced countries such as Chile and Braz to corsider LNG imports. Only Trinidad and Tobago exports to other regions, including 440bn cf of LNG to the US in 2005, Brazi's consumption has quadrupled in the last 10 years t0 0.73 trillion cf ~ nearly 17% of regional con- ‘sumption ~ as a result of rapid economic growth and favourable goverment energy policies, and the end is set to continue. But dessite rising domestic pro- duction ~ reserves have more than doubled in the last, 10 years to 11 tilon cf, folowing a sting of offshore discoveries ~ the country will not be self-sufficient Lunt! at least 2012. The country imported 312bn cf in 2008, from Argentina and mainly Bolivia. Regena consumption is projected to increase by Bia yeorto 2025, To egos agest spate, Indones, Nalysa and Aust, ploy an fran ‘len aret, ft tho pas of net roa wl be set by ing tonsumpton in China snd Ind Togeter these fv count econ for 57% ete erpecteseponal eon dant, wh projet gp ana rreass of 68% onda tspetr Gas oes un of Cats rmay errs co sumption, but goverment plans t eaves depen nce on coal for por gareton wi oe po ata lager tare ofthe cnr rhe Canis esercso 83 tion ef prosuted 75 ton etn 2005, enough met domes ress. But cs Somand ees, gos tne eter Ppetnes em Russa ere bong. Scere and UNG ipo pls ae tokng shape Tre county's LNG temial stated up June 2008 fd wo ithe lets are une constuction, et begn operators eround 2003, Uni 2008, nd ett and consurton were in Dolce, bu th ceand sto gow ty 4.8% 8 Yeu on aves 25 on of 2005 te corey Become ines pant Sepencan NG Igor Bogan 2004 ane cy has to serra te rato thtd under consution ane tee ae at the planing age Pane w pot gay pene em ran, tah Pasta, hove fson onthe ein ad fecoer 1 yen, bt ate gatering monet Poison baw 34 tone oF toed roses, po cacing sound 1 tion efor the tomes mot fet. Derand fs exected fo he Sebsantaly te re fe yar ~ rang by 11.5% in 2005” 0 gs Decomesthe el sf enoce fr pove gereraton. Ths wi necesset asap som eto an, or tet time, impos. The goverment basin te Fa Pakistani pot an aims tet wou he ‘abe even nat ine oxrson ie The largest UNG consumer th wor, Japan plays an potatoe mre Asa est gos ar fet consumption peed fo rea #2 ion Ct in 2025, yp tom 2.8 tion cf n 2005, at 3 fate of 16% ayer The county hos 25 opr UNG impart terminals ond one Unee consucton, wen eto atop 2008: South Hoon the Worl'ssecondargest LNG importer as demandhas increased markedly since the country’s recovery fom the Asian economic criss inthe late-1890s ang is projected to reach 1.8 trlion ef in 2025. The coun: ‘ny has negligible resenes and ne pipeline supply, but ‘Seoul hopes to negotiate a route from Russia, Indonesia produced 2.7 trillion ef of gas in 2005 while consuming only 1.4 trilion ef, AS well as LNG delveries to Japan, South Korea and Taiwan, the country pipes gas 10 Singapore. There are two’ LNG plants with @ combined nameplate capacty of 2m ty and a thie plant (7.6m Wy) is under construction and due to come on lire within three years. However, declining, production is threatening Indonesia's posi tion as the word's largest LNG exporter ~ the county has had to reduce deliteries to its main customers. At the beginning of 2004, Malaysia's proves reserves were estimated at 87.5 tillion of. The country Is the world’s second largest LNG exporter, accounting for 15% of world trade. In an effort to increase production, exploration is under way in the Malaysia-Thailand Joint Development Authority area. The county also supplies Singapore by pipe- line. Thailanc’s gas market developed rapely in the 1990s, as the Country increased gas-fired electricity ‘generation. Reserves are estimated at 12.5 trillion cf, but with production of 0.77 tnllion ef in 2005 and consumption of aver 1 trilion ef, Thailand imports 3115bn chy from Myanmar. fustalia is the third-largest LNG exporter in Asia- Pacific. Two operational plants export over 15m vy; ‘an expansion of the North West Shelf plant will ado a further 4.4m vy by 2009; anda further four export schemes are planned. Regional consumption has risen sharply, from 3.4 tilion Fin 1990 t0 8.9 trllon of in 2005, and is projected to reach 12.2 vilhon ef in 2025. The region's o-exporting countries are expanding domestic gas use, n place of ll, to release additional oil volumes for expo. After Russia, Iran has the world's second-larg- est proved reserves, at 944 trilion cf. But despite its abundant reserves, Iran imports gas from Turkmenistan, because its major demand centres are in the noth, far feom its resewes base, The giant South Pars field, in the Mideast Gulf, is geologically diviled with Qatar (which calls its portion the North Fielc). The olf ministry estimates South Pars will even- twaly produce up to 8bn cffd and could eam $1:1bn 8 year for 30 years, but although there =e several Plans for gas export schemes, all are specuative, Uiith proved reserves of 910 illon ef ~ primarily iin the North Field ~ Qatar's resources rank thirc behind Russia and tran, The country mainly exports iin the form of LNG through the Qatargas (9.5m Uy) and RasGas (16m Uy) ventures. New trains Luncer construction will boost capacity at Qatargas to nearly 41m vy by 2011, with RasGas capac: ity ootentially rising to over 36m vy by 2009. Also based on North Field gas is the first, of possibly ‘many, gas-to-liquids (GTL) plants in the country. The ‘Onyx GIL plant produces 34,000 barrels a day (b/d) Of diesel from natural gas and plans are to increase plant eapacity t2 100,009 td. Shell is also plan- hing a GTL. plant in the country ~ Pearl GTL would have a capacity of 140,000 b/d. Dolphin Energy's pipeline project to supply gas to the United Arab Emirates (UAE) Is due to begin deliveries in 2007. However, in April 2005, Qatar announced a moratorium on new gas projects to ensure optimal reservoir management and, there- fore, the productive life of the North Field. This was only expected to last until 2008, but Doha seems reluctant to add to the 2Sbn cf/d itis committed to producing, at least until 2012 At 244’ illion cf, Saudi Arabia has the world's fourthargest reserves and it alms to increase these by 3-5 tilion cfy to meet growing domestic demand. ‘A quarter of production goes to pevochemicals pro- ducers. Omani production more than quacrupled between 1995 and 2005, from reserves of 35 tilion ff, The government is aggressively pursuing industry growth, in part to diversity its econcmic dependence ‘on oil exports. The country exports small amounts to ‘the UAE as part of the Delphin project and over Sm. ‘uy of ING from a liquefaction plant at Qala trillion cf in 2008 to 4.6 tilion cf in 2025. Afrea is & net exporter, primarily from Algeria, Nigeria anc! Libya, ‘with over 85% of exports heading to western Europe ‘and some LNG to the US. The region has significant untapped potential, and with demand from western Europe rising, international energy companies are rapidly expanding investment. Ageia is one of the world’s biggest gas exporters. and the fourth-largest LNG exporter in 2005. The ‘country holds 32% of Alfica’s proved reserves, about 1162 trilion cf. About 72% of gas exports go to south- fer Europe through two of the largest international pipelines, Transmed and Maghreb-Europe ~ 1.4 vil lion cf in 2005. The country’s expancing LNG capacity exported 0.9 tilion cf. Nigeria produced 0.77 trillion cf in 2008, from reserves of 185 villon cf. Exports are in the form of LNG, from the five-train, 17.1m ty Bonny Isiané NUNG plant. & sixth tain will add another 4.1m ty of capacity in. 2007, and plans fora futher train would bring plant capacity to nearly 30m Uy by 2040. Two new projects are also planned with a combined capacity of 32m W. However, the West Affican Gas Pipeline project is scheduled to star up in Desember 2006, delivering to Ghana, Benin and Togo. An ambitious pian to ppe gas to Algeria for onward shipment to Europe, the Trans- ‘Sahara pipeline, & being considered. Egypt Decame the most recent country to export from Arica with the start-up in 2005 of the country's ‘two LNG export plants. Proved reserves of 67 trlion cf believed to be significantly larger ~ reserves neariy tripled between 1995 and 2005 ~ and major explora- ‘ton werk is taking place both on andl offshore. > Fundamentals oft Global Oi and Gas Industry, 2008 World overview ff a