The Time of Gas
CRUDE OIL WILL CONTINUE TO BE THE
main player in the energy mix, raising standards of living around the world for many years to come. But the importance of natural gas, and the liquids that support its development, is increasing in transport, petrochemicals and power.
Nowhere is this truer than in North America, where a tidal wave of NGLs and LNG is challenging Middle Eastern market dominance. This great gas glut provides opportunities: Waiting at the end of the tunnel are planners and investors in LNG, gas-toliquids (GTL), methanol and propylene. And oil sands demand for condensate is continually rising.
In August, the Alberta government is expected to award the first of its royalty-derived subsidies to petrochemical firms. Williams Energy will take the first final investment decision (FID) soon after to build a propane-consuming propylene plant in Alberta. Kuwaiti investment may follow next year.
Altagas expects to take an FID on building an LPG export terminal on the B.C. coast by year-end, and Chinese investors are in talks with Alberta’s Industrial Heartland Association to build a methanol export plant.
Canada’s natural resources minister, Jim Carr, says by the end of September the feds will decide whether to greenlight B.C.’s first major LNG export plant. South African and U.S. firms are studying building GTL plants in Alberta too, to produce transport fuels and naphtha. These FIDs will be influenced by oil prices—GTL is profitable when oil prices are high and gas prices low, and LNG prices in Asia are linked to oil. Furthermore, Canadian demand for LNG as a transport fuel for trucks looks poised to grow.
This fall, the Alberta government will unveil its plans to phase out coalfired power plants in the province, making room for 1.5 billion cf/d of natural gas demand to help fill the vacuum along with renewables. And that’s just Alberta.
Abundant U.S. gas supply is attacking other markets, creating an escape valve for the continent’s overproduction and supporting gas prices. The Texas Gulf coast has expanded propane export facilities easing the glut; Mexican demand for U.S. pipeline gas is increasing; the European appetite for U.S. east coast LNG is whetted; and U.S. petrochemical giants are spending billions on ethylene plants, boosting ethane demand. Additionally, Washington is leading a drive to replace coal with gas for the nation’s power plants. As an added short-term bonus, weather watchers predict that Mother Nature will this year produce a forceful La Nina, bringing a cold winter with her. This fall, the lights at the end of the great gas glut tunnel should start turning green.