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Exxon: Alaska gas can meet N.A. demand Richard Guerrant tells Meet Alaska that ExxonMobil, other Prudhoe owners, have financial strength, expertise, for gas project Kristen Nelson Petroleum News
Alaska and Mackenzie gas, increased LNG imports, base domestic production and unconventional gas will all be needed to meet a North American natural gas demand growing at about half a percent a year through 2030, says Richard Guerrant.
Guerrant, ExxonMobil Gas and Power Marketing vice president for the Americas, told The Alliance’s Meet Alaska conference in Anchorage Jan. 19 that ExxonMobil expects worldwide energy demand to grow by about 1.6 percent a year, “driven by population growth and economic development,” with hydrocarbons meeting about 80 percent of that demand.
The demand growth for natural gas, expected to be 1.7 percent a year worldwide until 2030, is the fastest growing part of energy demand growth, he said.
Producers take risk “The North American gas market is the most competitive gas market in the world and producers now take all the price and budget risk as they develop new supplies,” Guerrant said. Capital is invested on trust that a project will be commercially viable “and make a reasonable profit over a very long period of time.”
Liquefied natural gas now plays a larger role in global gas supply, and understanding the flows of LNG to various markets is key to understanding producer risk, he said. In the past, Middle East and Asia Pacific gas could only economically serve the Asia region, “but now Middle Eastern suppliers have the option to sell LNG into the Atlantic basin and Asia Pacific suppliers into the West Coast of North America.”
Because LNG supplies can be delivered worldwide, they “serve to link gas markets together creating a global gas market much like the global oil market,” Guerrant said.
In addition to LNG, unconventional gas competes in the market, and “coal and nuclear also compete against gas in the power generation sector and will take their share.”
Substantial risk in Alaska project Guerrant repeated what all the North Slope producers involved in the Alaska gas project have said, that the project has “significant risk.”
He said the project must compete commercially with other sources of natural gas supply.
The Alaska project has advantages, Guerrant said: financially strong participants with strong project execution skills “and a resource owner, the State of Alaska, who can provide the fiscal framework that will allow the project to proceed.”
The number of worldwide projects over a billion dollars puts “pressure on global materials, contracting services and skilled manpower,” and the number of such projects is growing: 46 were begun from 2001 through 2005; for 2006-10, 70 are expected to start up, “with most of the growth coming in projects over $5 billion,” he said.
“Now with size comes complexity and even greater premium on getting the design concept, execution, contracting and marketing plans right.” Good execution is critical, because “with size comes the amplified consequences of poor execution,” he said.
He reminded the audience that, whether the investment is in exploration, production or pipelines, the producers provide the financial underpinning “and the costs and risks will be passed back to them in the form of higher tariffs for shipping and processing commitments.”
The number of companies with “demonstrated capabilities and financial strength to effectively participate in managing these world-scale projects” is limited, “and the major owners of Prudhoe Bay are strongly represented on this elite list,” Guerrant said.
He also reviewed ExxonMobil’s expertise in arctic developments and said “we continue to spend more on technology than any other oil and gas company — about $4 billion since 2001.”
The company is also, he said, the “largest non-governmental producer of natural gas in the world.”
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