What Next: More on the Nat­u­ral Gas Op­tion!

Stabroek News Sunday - - WORLD NEWS -

Last week’s col­umn had raised the co­nun­drum: What next? Given that, I am ad­vis­ing against state in­vest­ment in oil re­fin­ing there­fore, what other ma­jor op­tions I am rec­om­mend­ing for re­al­iz­ing the sub­stan­tial po­ten­tial of Guyana’s re­cent petroleum finds. Thus far I have in­di­cated: 1) my open­ness to the con­struc­tion of mod­u­lar mini re­fin­ery/(ies) if fi­nanced by “non-state” in­vestors and, 2) the pur­suit of those com­mer­cial op­tions iden­ti­fied in the Pe­dro Haas fea­si­bil­ity study. A third op­tion, nat­u­ral gas devel­op­ment, was in­tro­duced last week and this will be fur­ther ex­plored to­day.

Nat­u­ral Gas: World Con­text:

First, con­sider the global nat­u­ral gas sit­u­a­tion. I had in­di­cated last week, the In­ter­na­tional En­ergy Agency’s (IEA) es­ti­mate of global pro­duc­tion (per­cent­age share by coun­try/re­gion), for the pe­riod 1973 to 2016. In the IEA’s 2017 Nat­u­ral Gas Anal­y­sis and Fore­cast, 2022, as many as 16 op­por­tu­ni­ties, which are en­cour­ag­ing for Guyana’s prospects have been iden­ti­fied; rang­ing from struc­tural shifts in global pro­duc­tion, con­sump­tion and trade, to en­vi­ron­men­tal, tech­no­log­i­cal and na­tional se­cu­rity fac­tors.

The IEA sum­mar­ily ob­serves: “the nat­u­ral gas mar­ket is undergoing a fun­da­men­tal transformation. In­dus­try has over­taken the power sec­tor as the driv­ing force be­hind the grow­ing use of nat­u­ral gas, thanks to ris­ing de­mand in places like China, de­vel­op­ing Asia, Middle East and the United States [the world’s largest consumer]. At the same time struc­tural changes in gas sup­ply and trade are chang­ing the global mar­ket”. (IEA 2017)

Con­cur­rently, other mar­ket char­ac­ter­is­tics have gained promi­nence, in­clud­ing: 1) a tem­po­rary global over­sup­ply of nat­u­ral gas, which puts pres­sure on com­pet­i­tive prices 2) the United States’ shale gas rev­o­lu­tion 3) the so-called “sec­ond wave” of liq­ue­fac­tion/tech­nol­ogy/ca­pac­ity ex­pan­sion 4) the dis­rup­tion of global trade, as re­flec­tive of struc­tural shifts in coun­try/re­gion dis­tri­bu­tion of con­sump­tion, sup­ply and in­ven­tory hold­ings.

Presently, more than 100 coun­tries use nat­u­ral gas sub­stan­tially, (with the United States the largest user). In­deed, back in 1970, one-sixth of to­tal en­ergy use came from nat­u­ral gas, to­day, how­ever, this ra­tio has reached about one-quar­ter. Nat­u­ral gas con­sump­tion, is grow­ing faster than both oil and coal. It has be­come the lead­ing en­ergy source and by 2022 it is an­tic­i­pated that, more than half of the fore­casted global en­ergy growth will come from nat­u­ral gas!

Guyana: Nat­u­ral Gas

Un­doubt­edly, such de­vel­op­ments sup­port the Gov­ern­ment’s de­ci­sion to en­gage En­ergy Nar­ra­tive (a net­work of Caribbean en­ergy ex­perts and strate­gic mar­ket an­a­lysts), ad­vi­sors both to gov­ern­ments and busi­nesses, to un­der­take “a desk study to de­ter­mine the op­tions open to Guyana’s nat­u­ral gas finds”, (GINA, April 27, 2017).

This study seeks to de­ter­mine for “of­fi­cial pur­poses”, the fol­low­ing: 1) the prob­a­ble size of Guyana’s “as­so­ci­ated and non-as­so­ci­ated” nat­u­ral gas sup­ply and de­mand 2) the var­i­ous mar­ket and other eco­nomic op­tions open for its us­age 3) likely costs 4) the tech­ni­cal/com­mer­cial fea­si­bil­ity of bring­ing na­tional gas on­stream 5) the tech­ni­cal/com­mer­cial fea­si­bil­ity of var­i­ous modes of trans­port­ing nat­u­ral gas from off­shore 6) the eco­nom­ics of Guyana nat­u­ral gas stor­age 7) nat­u­ral gas us­age for gen­er­a­tion and/or co-gen­er­a­tion of elec­tric­ity (tech­ni­cally and com­mer­cially) and 8) other re­lated mat­ters (like ac­ci­dents, en­vi­ron­men­tal im­pacts, and health im­pacts) as well as na­tional se­cu­rity con­cerns.

I rec­om­mend Guyana’s pur­suit of the nat­u­ral gas op­tion as re­place­ment for state in­vest­ment in oil re­fin­ing. Nat­u­ral gas us­age is rel­a­tively clean and af­ford­able. It is a rel­a­tively abun­dant source of do­mes­tic en­ergy, with prospects for ex­port­ing re­gion­ally and fur­ther afield. Fur­ther, it is more com­pat­i­ble with Guyana’s pur­suit of the aspi­ra­tional goal of a “green state”, cer­tainly when com­pared to build­ing a risky and dirty oil re­fin­ery.

Be­cause of Gov­ern­ment’s ini­tial focus on nat­u­ral gas use for elec­tric­ity gen­er­a­tion/co-gen­er­a­tion, it would be help­ful for read­ers to con­sider world elec­tric­ity sup­ply dis­tri­bu­tion, by source of fuel, for the most re­cent year avail­able (see Sched­ule 1). Re­lated data, which are in­struc­tive, is the list of the world’s top ten nat­u­ral gas pro­duc­ers for the most re­cent year avail­able, (see Sched­ule 2). Of note, this list does not in­clude any South Amer­i­can, African or West Euro­pean coun­tries!


One of the most im­por­tant rea­sons why the strate­gic mar­ket as­sess­ment by En­ergy Nar­ra­tive is so cru­cial, lies in the seem­ing “non-se­ri­ous” present-day es­ti­ma­tion of the nat­u­ral gas as­so­ci­ated/not as­so­ci­ated with Guyana’s petroleum finds. This is, all the more dis­con­cert­ing as I have come across press re­ports, which sug­gest Exxon Mo­bil and its part­ners will be fol­low­ing the in­dus­try prac­tice of pump­ing the nat­u­ral gas back into the oil reser­voirs, in or­der to raise their pres­sure to fa­cil­i­tate ex­trac­tion of crude oil. Clearly the eco­nom­ics of this process, from a Guyana per­spec­tive, can, and per­haps will, dif­fer, from that of Exxon-op­er­a­tors of the oil rigs/wells. This is why the out­come of the En­ergy Nar­ra­tive strate­gic as­sess­ment will form the ba­sis for my in­tended De­ci­sion Rule 3.


The bench­mark stan­dard for Guyana’s oil and nat­u­ral gas as­sess­ment is still the Unites States Ge­o­log­i­cal Ser­vice (USGS) 2000 World As­sess­ment of Undis­cov­ered Oil and Gas Re­sources in Cen­tral and South Amer­ica. There it is re­ported that the Guyana – Suri­name Basin holds a mean prob­a­bil­ity of 42 billion cu­bic feet of nat­u­ral gas (bcfg) and 2.3 mil­lion bar­rels of nat­u­ral gas liq­uids. Sev­eral press re­ports in­di­cate that Exxon and its Part­ners, are presently putting the nat­u­ral gas es­ti­mate at be­tween 3050 billion cu­bic feet. As planned, the En­ergy Nar­ra­tive re­port is ex­pected to put a bet­ter han­dle on this es­ti­ma­tion.

In con­clu­sion, Oil Now, (May 19, 2017) has re­ported that Min­is­ter Trot­man rec­og­nizes “cleaner nat­u­ral gas us­age” is help­ful for pro­mot­ing a Guyana green state and also rec­og­nizes its po­ten­tial power gen­er­a­tion for val­ueadded pro­duc­tion (of alu­mina)!

Next week I pur­sue these is­sues fur­ther.

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