FT special on the gas industry.
Gist: recession plus new shale supplies rebalance global supply and demand dynamic radically.
By the end of this year, Qatar will have completed one of the most ambitious industrial revolutions of past decades and in the process helped transform the international natural gas industry.
The small Gulf state this year expects to hit a natural gas export capacity of 77m tonnes a year, enough to supply all the needs of both China and Brazil.
Qatar has become the biggest trader of liquefied natural gas (LNG) in the world and a pioneer – together with the international oil companies it employs – in improving the process whereby natural gas is super cooled and turned into liquid so it can be put on tankers and transported to distant markets.
But the achievement comes at a time when halfway round the world a second, more recent natural gas revolution has also occurred, sending prices to record lows and forcing Qatar and other suppliers to adapt.
While Qatar was busy building its huge LNG complex of miles of winding pipes at Ras Laffan in the barren desert 80km north-east of the capital Doha, independent oil and gas companies in Texas were cracking the technology that would finally give them access to the gas trapped in the solid shale rock scattered across large parts of the US.
The process of breaking up the previously impervious rock, known as “fracking” in the industry, has unleashed a flurry of multibillion-dollar deals, including last year’s $41bn agreement by ExxonMobil to purchase XTO, the shale gas specialist.
European companies, such as BP of the UK, Norway’s Statoil and Total of France have joined the rush, each buying into the shale beds and the expertise ofChesapeake Energy, one of the US’s largest gas producers.
In terms of supply, the shale gas revolution has had a significant impact. In less than five years, the US has gone from seeking new sources of gas from overseas to being self sufficient.
In fact, for the first time in nearly a decade, the US has regained the position of being the world’s largest producer of natural gas. Its reserves life has grown from 30 years to a century.
No wonder energy companies are reluctant to make big infrastructure bets!
Much of Qatar's LNG was set to go to the US (now self-sufficient) and Europe (much less demand and investigating its own shale). China becomes Qatar's biggest buyer in the short run, as a result, but it too is moving heaven and earth on what is considered to be perhaps the biggest shale gas deposit in the world (in its northwest).
Underlying dynamic: everybody loves to talk about NOCs (national oil companies) owning the vast bulk of reserves and increasingly dominating the production of the same. So what are classic Western energy firms to do? They move into gas, and that creates its own system-changing dynamics.
Old theme of mine: supply does not equal power. NOCs can corner oil, and result will be demand shifts to other forms of energy and uses.
Now you get Russia's Gazprom rethinking its whole strategy, and Algeria, another big supplier, calling for a gas OPEC, which went nowhere.