August 2012, Vol. 239 No. 8

Features

Shells Voser Touts Historic Time For Natural Gas

Kuala Lumpur, MALAYSIA-During his keynote address, Peter Voser, CEO, Royal Dutch Shell, declared that “at no time in the history of our industry has natural gas been poised to play a more important role in the global energy picture. The natural gas revolution is THE most significant energy development in decades.”

Technological advances will result in natural gas being a “far bigger player in meeting our future energy challenge than we had previously assumed.

“It’s no coincidence,” Voser told a rapt audience, “that this year Shell expects to produce more natural gas for the first time in its history.”

One of its biggest benefits will be to generate electricity which requires relatively low capital investment, he said. After discussing how North America has already seen the “dramatic impact of the gas revolution,” Voser said the rest of the world also stands to benefit. He quoted from International Energy Agency estimates that suggest total worldwide recoverable gas resources at 250 years at current production.

While Australia holds large-scale deposits of coal-seam gas some estimate that China’s shale gas resources could be as much as 50% higher than those in the U.S. (30 Tcf vs. 20 Tcf), he said. South Africa, Indonesia and even India hold significant deposits of coal-seam gas, he added.

“But it is China and Australia that are most likely to see the next wave of this revolution. China’s potentially enormous deposits could play a major role in helping boost the share of natural gas in its energy mix, and easing its dependence on coal,” Voser said. Shell is involved with CNPC on several gas-related projects including the Changbei tight gas field in Shaanxi Province which supplies gas to Beijing and other cities in eastern China.

Tests are showing that China’s shale is “geographically more complex, but I think we can achieve similar cost optimization and progress like we have done in North America,” Voser said.

Shell is also considering shale gas prospects in Europe and suggested that Germany and the United Kingdom could hold wide resources of unconventional gas. Shell has invested in shale gas development in Ukraine.

Prospects For LNG
Turning to LNG, Voser said the fuel has tremendous implications for the growing Asia/Pacific, noting that host country Malaysia, Indonesia and Brunei are long-term suppliers with further exploration likely to yield even more opportunities for them.

“Thailand has become an LNG importer as well and several other ASEAN countries are prepared to do so including Malaysia, Indonesia and the Philippines. This is one reason why global LNG demand is expected to double in the next decade.”

Noting that Japan is investing heavily to lock in LNG supplies to replace its nuclear generating capacity, Voser said strong demand growth is possible in part because worldwide liquefaction capacity has increased about 40% in the past three years, much of that coming from Qatar, the world’s largest LNG supplier.

“This is great news for Asia as about 40% of Qatar’s LNG is reserved form Asian markets through long-term contracts. We expect an increasingly diverse group of suppliers for the Asian market, providing access to gas reserves around the world,” Voser said. Eventually, Australia, where LNG projects in the tens of billions of dollars are under way, could rival Qatar as an LNG exporter, he said.

Asia as well as Europe will be able to benefit from ample North American supplies with Voser expecting a growing LNG trade across the Pacific from Canada, the world’s third-largest gas producer. Shell, in connection with several Asian partners, plans to develop an LNG export terminal in western Canada.

Voser said Shell will begin producing and liquefying natural gas at sea with its first floating LNG facility being designed for a gas field off Australia’s northwest coast that should be completed in 2017.

“Our ambition is to build more FLNG vessels to tap other offshore fields that would otherwise be too costly or difficult to develop, including those in Asian waters. The bottom line is governments in Asia and elsewhere have every reason to back natural gas as a secure and sustainable energy source, and every reason to make the most of their domestic gas resources,” he said.

Pointing to Singapore, just an hour’s flying time from the convention site, Voser said Shell is looking at expanding opportunities to use LNG as a marine fuel.

“In Singapore and the Dutch port of Rotterdam, we are looking at expanding opportunities to use LNG as a marine fuel. In western Canada, Shell is preparing to make LNG available this year to fleet operators along a busy truck route. Drawing on the region’s natural gas to produce the LNG at a small-scale gas liquefaction plant, we believe fleets on this route could see a reduction in greenhouse emissions of up to 20% on a well-to-wheels basis,” he said, adding that Shell is also studying ways to use LNG as a transport fuel in the rail and mining sectors.

Later in a question and answer session with reporters, Voser said the world needs all of the planned natural gas projects through 2025 to meet demand as the world’s population will increase by 2 billion. Already, he said, 1.5 billion people do not have electricity. Making the situation even more critical is the fact that it will not be before 2015 that significant new LNG projects hit the market, which will likely lead to a tight supply market. By 2020, Voser predicted that LNG consumption worldwide should double as compared to 230 million tons a year today.

Environmental Issues
Voser did not back away from environmental issues, suggesting that the industry must do a better job of communicating with the communities within which it is working, or wants to work in, to offset some of the misconceptions regarding the practice of hydraulic fracturing.

On the topic of greenhouse gas emissions, especially methane from shale gas production, Voser said “we know methane releases can be significantly reduced by using proven technologies.

“At our Pinedale operation in the state of Wyoming we installed a system to help us stop methane leaks detected with an infrared camera. But clearly more research is needed to understand the true nature of methane releases from the gas industry. In general, our industry needs to do a better job of listening and responding to these concerns.”

One area Shell has pledged to improve gas flaring in Nigeria. Voser said the company has spent billions on developing methods to reduce flaring and will soon be able to comply with global standards.