WGC09: Gas Projects Need Long-Term Investment
Source: Oil & Gas Journal, Warren R. True (10/7/09)
"With demand likely to recover more quickly than investments, that will put a squeeze on supply"
Once a "second prize to oil," gas is now a premium commodity. To retain this status and meet projections by the IEA that it make up 50% of global energy mix by 2030 requires lower development costs, long-term investment and superior project execution.
Didier Houssin, director of the Directorate of Energy Markets and Security for the IEA, told conference attendees the global recession has afforded the world an opportunity to address climate change as growth in overall energy demand pauses.
Evidence is growing, said Kirkland, that development costs have started to come off their highs of only 15 months ago. That's an important step, he believes, in encouraging serious, long-term investment. Such investment must be guided by transparency, predictability, and discipline.
"Stable, predictable, and reasonable terms are needed to ensure investment continues to flow. Taxes, fiscal regimes, sound regulatory structure and sanctity of contracts must be in place and fit together," he said.
IEA estimates demand in countries of the OECD has fallen by 6.5% in 2009 compared with 2008. And for the first time since WWII, global electricity demand has fallen, he said.
IEA has two concerns, said Houssin: climate change and energy security. In the struggle with climate change, "gas comes off better than alternatives because the latter are less proven and take longer to build," he said.
Two patterns in natural gas demand are evident in the near future, he said: demand for power generation has been cut in half, and demand among non-OECD nations has increased.
As a result, investments in the near future will slow, which will in turn delay final investment decisions for projects needed to meet growing global energy demands. With demand likely to recover more quickly than investments, that will put a squeeze on supply.