Saturday, June 09, 2012

Global Gas Demand Rises, GTL Likely to Grow Apace

While demand for crude oil appears to be stagnating, global demand for natural gas is expected to grow at a rate of about 3% per year.
Global demand for natural gas will rise a faster-than-expected 2.7% annually through 2017 to 3.94 trillion cubic meters, with China and the US leading growth as both countries switch from coal to gas to generate electricity, the International Energy Agency said Tuesday.

Over the five year-period, gas demand will grow 17%, or 576 billion cu m, equivalent to around 90% of Russia's current gas production, according to the IEA's new medium-term outlook for gas markets.

The new higher gas demand growth estimate is up from the 2.4% annual growth rate from 2010 to 2016 IEA predicted last year, reflecting mostly the continued surge in shale gas output from the US.

China remains the fastest-growing market and its consumption is expected to double to 273 billion cu m in 2017 from 130 billion cu m in 2011, representing an average growth rate of 13% per year. _Platts

It is natural that China would be the fastest growing market. In the ordinary scheme of things, that would be very good news for Gazprom, which supplies a large portion of China's natural gas demand. But in the light of the global growth in shale gas production -- including China's very own vast shale gas resources -- Gazprom will probably have to settle for a smaller piece of the pie than it had expected.

Canada and the US intend to capitalise on the rising demand for natural gas in Asia, by piping much of their excess gas to coastal terminals, where the gas will be liquefied to LNG and shipped to Japan, China, South Korea, and other Asian markets. For example, in Canada:
Anglo-Dutch energy giant Royal Dutch Shell Plc (RDS.A - Analyst Report) and partners have selected Calgary-based TransCanada Corp. (TRP - Snapshot Report) to build an estimated C$4 billion ($3.8 billion) natural gas pipeline across northern British Columbia.

Per the agreement between the parties, TransCanada will design, build, own and operate the proposed ‘Coastal GasLink’ project that is intended to transport natural gas from the Montney Play in northeastern British Columbia to feed Shell Canada’s recently announced massive liquefied natural gas (LNG) export terminal near Kitimat, British Columbia's northern coast. The Kitimat plant is owned by Shell (40% stake), together with other partners – Korea Gas Corp., Mitsubishi Corp. and PetroChina Co. Ltd. (PTR - Analyst Report) – who own 20% each.

The Montney formation is considered as one of North America's richest gas basins, expected to hold trillions of cubic feet of gas. However, the region is also one of the most distant from any large U.S. market, making it a top draw for LNG export. _Zacks

Similar plans are being made for converting US gas to LNG at Gulf of Mexico and Pacific Coast terminals.

Another significant Canadian gas development is the plan by Sasol to build a large gas to liquids production facility in the Candian Northwest:

According to Mike Nel, the company’s Canadian development manager, the South African giant is proceeding with front-end engineering and design (feed) on a proposed 96,000 barrel a day (b/d) facility, which would be one of the biggest in the company’s portfolio; only the 160,000 b/d Secunda facility in South Africa would be larger, but it uses coal-to-liquids.

Sasol is proposing to convert 1 billion cubic feet per day (cf/d) of unconventional gas from Canada’s Montney shale play into products like diesel and naphtha. A feasibility study into an initial 48,000 b/d first phase for the facility will be released in the second half of this year.

_Petroleum Economist

Sasol has plans for a similar GTL plant in Louisiana, as does Shell.

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