Globally, Gas is Growing

Natural gas demand is growing swiftly, according to Axel Scheuer, European Regulatory Advisor at ExxonMobil Gas & Power Marketing.

Speaking before delegates at the European Unconventional Gas Summit  in Krakow, Poland, he showed that Asia-Pacific had the highest growth in demand, while there was moderate growth in North America.

“Gas will be used increasingly instead of coal. It’s a strongly growing and global market. That demand will compete with global supplies,” said Scheuer.

He showed a graph of “A Market for Unconventional Gas” which revealed that unconventional made up a large proportion of US natural gas; imports and LNG, meanwhile, were big in Europe.

“There’s a hugely growing supply of unconventional in US, freeing up LNG for European market,” reported Scheuer. “Local production is declining in Europe. By 2030 unconventional gas will only make up a small proportion of supply, because it’s getting a late start.”

With jumping arrows on his illustration, he said, “LNG bolts can go wherever they need to go.”

Colors indicated the liquidity of the gas market, determined by things like duration of the contracts. "The UK for example is a fully liquid market, but so are the Benelux states. A supplier will sell you gas at hubs at the price determined for that day."

How did the greenish come to be? Scheuer said it was normal market evolution: “It attracts more and more players, and due to the endeavors of the EC to open up and create a single market for natural gas.”

The result, he said, was the liquid market opening up in Central and Eastern Europe “at its doorstep,” something that would contribute to unconventional gas production.

Then, he showed a chart of global legislative/regulatory activity. The countries in red countries, he noted, had much less liberalized markets, while green indicated liberalized.

“Argentina were one of the first countries to introduce a market framework which was completely liberalized and attracted investment to produce a very healthy gas industry in a short time,” explained Mr. Scheuer. “During their economic crisis, exports were prohibited and investments into the gas industry were stalled. So it’s one of our global examples.”

“Why are open markets so good?” he asked. “They provide benefits to all stakeholders involved: security of supply, creation of jobs, integration across borders in the EU, and countries are striving to cut emissions. An open gas market could address these points.”

He then showed “countries’ wants,” “investors’ wants” and “customers’ wants.”

“Customers want clean, safe, reliable and affordable gas,” said Scheuer. “Open markets create ‘win win’ situations for all stakeholders involved.”

“As producers we put value on security of demand,” he said of Exxon. “We value having a range of customers we can sell the gas to, long term but also shorter term lower volume contracts.”

According to him, security of demand was also facilitated by the ability to import and export gas, the latter being necessary when local demand was lower and gas could be exported.

A diverse customer base was desirable, as was market-based pricing. 

He said, “Gas prices should not be regulated but must be formed as a result of supply and demand. Market-based pricing would allow for unconventionals development and facilitate the formation of a competitive market in Poland.”

Effective and non-discriminatory transportation system access, he said, was also key.

“Over the past decade, gas industries in Poland and Western Europe have gone through a process of change. All these countries have very healthy and competitive gas industries,” noted Scheuer, who contended that the regulatory and competition authorities needed to be empowered.

“We all agree that there is an unconventional gas market but it is a competitive one. There’s an increasingly liquid market at the doorstep of CEE, which needs an open gas market.”

He concluded that dialogue was necessary to ensure good effective legislation.

Editor's Note:  Speaking at the World Shale Gas Conference today in Houston, Mark Albers, senior vice president of Exxon, said that development of oil and gas in shale and other unconventional formations in global markets will move forward more slowly than in North America, where infrastructure and a supportive regulatory framework already exist