the future is bullish
“Natural gas is truly becoming a globally traded commodity, and the future is bullish for liquefied natural gas (LNG),” according to Mike Wirth, Chevron vice chairman and executive vice president of Midstream and Development. With LNG demand projected to grow by roughly two-thirds over the next decade, he says, “It’s an exciting time to be a part of this industry.”
Wirth speaks on an International Energy Leadership Panel at the Gastech Exhibition and Conference in Chiba, Japan, this week, which will discuss how gas suppliers are adapting to the changing global market. Gastech brings together more than 2,500 delegates including commercial experts and technical innovators from across the LNG supply chain.
wirth on supply, demand, and taking a long-term view
Based on current projections, the Chevron vice chairman says LNG demand will outstrip supply from existing production and currently sanctioned projects in the next decade. Project developers must take a long-term view in making their decisions, he says.
In mature markets such as Japan and continental Europe, deregulation, fuel competition and environmental concerns will be important factors in making investment decisions. In emerging markets, natural gas will assume a rising share of the energy mix, encouraging new markets and new buyers for LNG.
Chevron Vice Chairman and Executive Vice President of Midstream and Development
Supporting these growing economies and improved living standards will require affordable energy that fits into household, business and government budgets. Wirth says that natural gas will be critical to providing the basics, such as transportation to get to work and to seek medical attention, and electricity to cook food and light homes, schools and businesses.
dealing with a supply gap
How will energy producers cope with this growth in LNG demand? While current LNG supply coupled with projects in progress is expected to meet near-term demand, a supply gap is anticipated in the years ahead.
Wirth remarks that a significant percentage of capacity entering the market today is coming from Australia, including LNG from Chevron’s Gorgon Project and, later this year, from our Wheatstone Project.
Wirth adds that the next wave of supply has already begun to come from major projects now under construction in the United States. However, beyond these projects, the energy industry will face key challenges and major investment decisions on how to best meet long-term demand by developing supply and deliver to market reliable, affordable LNG.
“Only the most economically feasible and cost-competitive projects are likely to be sanctioned,” says Wirth. Achieving this goal will require strong customer relationships and the development of new partnerships as buyers’ needs change and new buyers enter the market.
Support of host governments will be essential to source LNG, access markets and enable development. This will require mutually beneficial financial, social and environmental terms and conditions.
Producers and buyers will play key roles in driving forward any new LNG projects. Producers will need to drive down the costs of their projects, recognizing that buyers have choices.
And buyers will need to keep in mind that today’s low prices won’t last if long-term supply does not keep up with demand, he says.
Wirth recognizes that these are not necessarily new challenges; but they can be met, as they have in the past. “It is through communication, collaboration, technology and ingenuity that we’ll solve them again.”
Published: April 2017