The global gas supply business may have suffered a double whammy since 2008 when demand evaporated and the world’s largest consumer, the US, turned to unconventional domestic supplies in the form or shale gas, rather than imports by sea. But energy analysts are now predicting a firmer future for gas, with the International Energy Agency’s recently released report, “Are we entering a Golden Age of Gas” suggesting that recent over-supply could disappear completely by 2015.

According to industry statistics the rebound has already happened in large parts of the world. Global gas consumption in 2010 rose by 7.4% year-on-year whilst growth in the Asia-Pacific region broke through 12%, according to BP’s Statistical Review of World Energy. In a recently published report, energy analyst Infield notes the turn-round in gas fortunes, and predicts that the long-term growth trend has resumed and will continue, with global gas demand likely to reach 4,300bn m3 by 2025, giving gas a likely share in the world energy mix of close to one quarter.

Meanwhile, the broadening of gas sources – and the advent of new technologies including fracking and offshore floating facilities – are likely to ensure that gas prices remain competitive for the foreseeable future, according to Infield. The analyst predicts that the link between oil and gas prices is likely to become harder to sustain in the medium term, with tighter fundamentals in the oil market likely to cause a wider de-coupling between oil and gas prices in the future.

The Infield report also notes growing price variations between gas markets in the Atlantic and Pacific. In fact, this growing gap has meant that plans for various new US LNG import facilities have gone on hold, and a number of LNG carriers have been diverted from long-term US gas import trades to new short-term business, taking advantage of arbitrage opportunities between the US and Asian markets.

Asian demand has, of course, been fuelled by the fall-out from Japan’s Fukushima accident. Nuclear power has provided about 30% of Japan’s energy mix in recent years, but this share is likely to fall as the country seeks to diversify its energy base. Meanwhile, the Fukishima disaster has had global repercussions – Germany, for example, is intending to phase out existing nuclear plants by 2022 and other European countries are on a nuclear go-slow, at least for the moment.

For specialised ship repairers with a track record in the LNG sector, there appear to be a range of exciting new opportunities linked to life extension, fleet expansion and the introduction of a range of new floating facilities which will require a whole new approach to ongoing repair and maintenance. Infield highlights the significance of Shell’s recent Final Investment Decision on its Prelude floating LNG project off the North West coast of Australia. The world’s first such project, production is likely to begin in 2016 at a peak production rate of more than 5m tonnes of liquids a year.

Infield’s data lists 15 LNG liquefaction terminals in operation today and supplied from offshore gas reserves. The largest is Ras Laffan in Qatar with capacity for more than 77m tonnes a year. In a distant second is Bintulu in Malaysia (about 23m tonnes/annum) and Bonny in Nigeria (about 22m tonnes/annum). Other plants include Karratha in Australia (16.3m tonnes/annum), Point Fortin in Trinidad (14.8m tonnes/annum), Sakhalin in Russia, Tangguh in Indonesia, Idku in Egypt, Lumut in Brunei and Das Island in the UAE. As in the case of the oil markets, Infield notes that “the locus of global gas demand will be shifting east for the foreseeable future” and notes that Australia is one of the fastest growing regions in terms of available supply for LNG projects, with output geared to markets in Asia. .

The cost of shipping LNG by sea as compared to offshore pipelines is cost-competitive over distances of more than 1,100 kms, according to Infield, or 3,250 kms for onshore pipelines. The analyst believes that a healthy profit margin is likely to prevail for LNG business in the near future. The cost of getting gas to market is estimated in the range of $3-5.5/m Btu this year, and is forecast to rise slowly, to only about $3.5-7.5/m Btu is 2017.

The views of the Publishers do not necessarily correspond to the views of Lambos Maritime Services Ltd.
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