July 2009 Vol. 236 No. 7

Q&A

Volatile Conditions Set Stage For 24th WGC

Probably there has never been a better time for the tri-annual World Gas Conference scheduled for Oct. 4-9 in Buenos Aires, Argentina.

Billions of dollars, rubles, pesos, yen, francs, pounds, etc. have been – and continue to be – invested in liquefied natural gas projects, the result of which has made natural gas into a global energy commodity.

But with progress come risks and challenges. The stunning economic downturn that has gripped the world has led to a glut of natural gas at a time when producers were spending record amounts on developing new sources of supply. The result has been a severe price crash that has caused natural gas – traditionally the most volatile of fuels – to become even more as prices continue to lag in the mid $3 range per million Btus with no change in sight. Yet this comes at a time when everyone wants to go “green”, and natural gas is the greenest of petroleum products.

What does this mean for new pipeline development? After years of unprecedented growth, construction is in a hiatus. But for how long? Tens of billions of dollars worth of new construction as well as expansions are sitting still, waiting for the go-ahead.

Many of these questions will be on the agenda when the world’s leading natural gas executives converge in Buenos Aires for the 24th World Gas Conference. No one can predict what short or long-term solutions will eventually emerge, but perhaps what is most important is that at least there will be discussion.

Heading up the conference is Eduardo Ojea Quintana, a lawyer who graduated from Universidad del Museo Social Argentino. Ojea Quintana began his career at Perez Companc S.A., where he eventually became General Counsel. In 1992, he was appointed Director of Legal, Regulatory and Public Affairs for Transportadora de Gas del Sur S.A. In March 1998, he became General Director of the company.

Ojea Quintana established his own practice in 2004. He advises investors and shareholders on energy issues; additionally, he sits on the boards of several oil and gas companies in Argentina and abroad.

Ojea Quintana has been actively involved in the energy industry throughout his career. He has been a member of the Chamber of Argentine Oil Companies (“Cámara de Empresas Petroleras Argentinas”), an executive member of Instituto Argentino del Petróleo y del Gas, the Argentine Business Alliance for Sustainable Development (“Consejo Empresario Argentino para el Desarrollo Sostenible”) and Centro de Estudios para la Actividad Regulatoria Energética. He served as the Argentine delegate on the International Gas Union Executive Committee and is Chairman of the Organizing Committee of the 24th World Gas Conference to be held in Argentina in 2009.

In an interview with P&GJ Ojea Quintana discussed his expectations for the conference.

P&GJ: How will attendance at the 24th WGC compare to previous events? Will it be affected by the global recession?

Ojea Quintana: We are getting ready to hold an event that will be similar to the ones held in Amsterdam, Nice and Copenhagen. We are expecting around 3,000 people from all over the world. All the indicators used for monitoring interest in the event, such as number of attendees registered so far, papers submitted, number of companies that have agreed to participate in the exhibition, are very positive. Because of the issues involved and the quality of the participants, this type of event presents a very special opportunity that companies will not want to miss. As a result, we believe that the global recession will not have a significant impact on attendance at the event.

P&GJ: What topics are likely to arouse the most interest among attendees?

Ojea Quintana: The most important and attractive issues to be considered at the conference are a review of the natural gas strategy toward 2030 in the light of global energy challenges; natural gas contributions to the industry in terms of safety, reliability and the environment and regional market integration. These issues will be addressed and analyzed from both a strategic and a technical perspective.

P&GJ: What significant changes have there been since the 2006 conference?

Ojea Quintana: During the course of the Argentine Triennium (2006-2009), the office of the Chairman of the International Gas Union (IGU) has worked hard to bring the experience and technical quality of the work done by IGU teams to the nations that are the biggest producers and consumers of natural gas. The goal of our efforts was for those nations to have valid and sustained information at the time of defining their natural gas policies and strategies. In this regard, the 24th WGC will be the first to include a panel of energy ministers who will discuss natural gas global policies.

P&GJ: In view of today’s economic climate, what would you consider the three most important issues facing the natural gas industry?

Ojea Quintana: Reaching the highest possible number of markets, at the lowest possible price, and in the best possible environmental conditions. I think that sentence summarizes the challenges facing the natural gas industry over the next few years, not only because of the economic conditions now prevailing, but also because the industry firmly believes in the important benefits that natural gas can bring to the economy of any country.

P&GJ: How do you view the future for natural gas, especially in terms of cleaner fuels and climate change issues?

Ojea Quintana: I have no doubt that natural gas will continue to be the engine of economic growth in a number of countries for many years to come, mainly because of the industry’s contribution to power generation, and because of the benefits of being a clean fuel. Significant progress is being made today in a number of countries in terms of the development of alternative fuels such as biofuels. I think, however, that many years will have to pass before natural gas is replaced, not only because of its important role in the energy matrix of each nation, but also because it will be very difficult for other fuels to match the environmental advantages of natural gas.

P&GJ: Do you think we’ve finally seen an international natural gas market evolve?

Ojea Quintana: Technological progress has certainly brought about some substantial changes in the natural gas market. I am talking particularly about liquefied natural gas. Development of natural gas markets has also been fostered by the integration process among producer and consumer nations, as they understood that they needed one to help one and accordingly began to work together in order to develop natural gas reserves and markets.

P&GJ: How has the role of LNG changed in the past couple of years and do you see its growth continuing?

Ojea Quintana: LNG has turned natural gas into a commodity, by allowing a number of markets access to natural gas and the related benefits. We can look at what has happened in the Asian markets. Technological progress has helped reduce the cost of natural gas and made it available in both large and small amounts. We will see LNG grow even more over the next few years, as we leave behind the current structure, new LNG plants are established only where a market exists and there is the assurance that natural gas will be sold for many years into the future. We think LNG facilities will be developed at better prices, in competitive conditions.

P&GJ: Where does it appear that we will see the most new pipeline construction? Is the construction market likely to pick up again in the near future?

Ojea Quintana: Natural gas will continue to be provided through both pipelines and LNG. There is a distance/volume ratio where the use of pipelines is more competitive than LNG; there are also geographic conditions involved. This is valid anywhere in the world. I cannot say that pipeline construction has decreased as a result of LNG growth, because pipeline construction continues to exist even in the most developed countries.

P&GJ: What new technologies are we likely to see in the natural gas industry?

Ojea Quintana: This question will be fully answered during the course of the WGC by 11 IGU committees that have been working on every aspect of the natural gas chain, from exploration to production, storage, transportation, distribution, LNG and use of gas and others. These committees will present the outcome of three years of hard work to complete the triennium program submitted by Argentina in 2006.

P&GJ: Can you discuss the natural gas market in Argentina? What factors are driving the natural gas industry?

Ojea Quintana: The natural gas industry has grown significantly in Argentina where it accounts for 47% of the nation’s energy matrix. This was due to a number of factors, including private-sector involvement in exploration and production efforts, the presence of foreign companies, privatization of electric power and natural gas transportation and distribution companies and power generation companies. Technological development, the existing infrastructure and the reliability of natural gas supply have enabled the natural gas industry to grow not only as a source of energy, but also as raw material and fuel for industrial uses. Argentina now needs to get back on track and attract foreign investors, by means of reliable policies and legal security, so that the country can remain on the path of growth.

P&GJ: What has been your greatest challenge in preparing for 24th WGC, and how will you be able to determine whether it was successful?

Ojea Quintana: The biggest challenge has probably been to get to the 24th WGC with the infrastructure ready so that attendees will have the environment and comforts they need in order to devote themselves to an exchange of experiences and technology. On the other hand, the unconditional support of the private-sector natural gas industry in Argentina, acting through the sponsors, ensures that this will be a successful event.