x Abu Dhabi, UAEWednesday 24 January 2018

Gas market is facing a new world order

New technology is causing an upheaval in the distribution of world gas supplies.

New technology is causing an upheaval in the distribution of world gas supplies. As a result, the world's biggest energy consumer could become a net gas exporter, as some liquefied natural gas (LNG) exporters start imports. Last week, the US Potential Gas Committee - a group of industry, government and academic experts - estimated America's potential gas resources at 1,836 trillion cubic feet (cu ft), representing 80 years of supply.

When the country's 238 trillion cu ft of proved gas reserves are added, the US has a total future gas supply of more than 2 quadrillion cu ft, or enough to last 90 years without imports. The committee's latest estimate is 39 per cent higher than it calculated two years ago, and the highest on record. The increase is due to a re-evaluation of huge shale gas deposits, an "unconventional" resource that was previously deemed uneconomic. But that has changed with advances in drilling and a technique called hydraulic fracturing, which opens channels underground to ease gas flow.

"New and advanced exploration, well drilling and completion technologies are allowing us increasingly better access to domestic gas resources - especially unconventional gas - which, not all that long ago, were considered impractical or uneconomical to pursue," said John B Curtis, a committee member and professor of geology at the Colorado School of Mines. In contrast, Malaysia's Petroleum Nasional (Petronas) has signed a 20-year contract to import 2 million tonnes of LNG annually from Australia, starting in 2014.

Malaysia boosted LNG exports from its liquefaction complex in Borneo to a record 22.87 million tonnes last year, putting it in second place behind Qatar. But production is falling from fields off the Malaysian Peninsula that supply 75 per cent of the state's domestic gas requirements. The Australian contract is part of Petronas's efforts to secure a reliable gas supply for the future, the state-owned company said last week.

Indonesia, the world's third-biggest LNG exporter, is also considering imports. It recently announced plans to build an LNG receiving facility on Java, its most populous island. A recent surge of unconventional gas development in north-western Australia is helping Asian countries avert shortages. Coal deposits, rich in methane, are the source of the new supply. The US is also beginning to tap its coal deposits - the world's largest - for gas, as is neighbouring Canada.

Little wonder, then, that T Boone Pickens, the Texan billionaire hedge fund manager, last week said he doubted a proposed US$26 billion (Dh95.49bn) gas pipeline from Alaska to the rest of the US would be needed. Mr Pickens has been promoting a scheme to use US gas to cut the nation's dependence on foreign oil. But instead, the US may boost participation in global gas trade through both exports and imports. The tactic would strengthen the country's energy security by diversifying its supply options.

Without a pipeline, 39 trillion cu ft of proved gas reserves would be stranded on Alaska's Arctic shore. But Asia presents an alternative market, and global warming is creating an opportunity for LNG development by extending the Arctic shipping season. Another potential new LNG exporter is Brazil, which expects to develop large offshore gas reserves. This all goes to show that tectonic shifts are underway in a gas market that is becoming increasingly global.

Next week, 14 gas exporters, led by Qatar, Russia and Iran, will meet in Doha to establish a secretariat for the Gas Exporting Countries Forum. The organisation has been called a "gas OPEC", and consuming countries worry it may unduly influence prices. But with major new gas supplies coming from non-member countries, including the US, Australia and Brazil, those concerns seem misplaced. @Email:tcarlisle@thenational.ae