THE WALL STREET JOURNAL Energy Journal
Energy Journal: Global Gas Race Heats Up
By Ben Winkley
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GAS RACE BEGINS
The world’s three biggest natural-gas producers—Iran, Qatar and Russia—have agreed to work on stabilizing the price of the resource, according to a report from Central Asian news agency Trend.
The three, who have arranged a de facto OPEC-style grouping that controls around 60% of the world’s natural gas reserves, are fearful of falling prices if and when the U.S. gas production begins to move out into the wider world.
The ground work for this is taking place now. Some of the world’s largest energy companies are proposing half a trillion dollars in projects to export North American natural gas, The Wall Street Journal’s Chester Dawson and Ben Lefebvre report.
Many of the projects will flounder, either through attrition or through political opposition, but an estimated $110 billion worth across the U.S. and Canada could see it through to completion.
The target market for all this gas is resource-hungry Asian markets, where wholesale prices are four times the prices paid in North America. The possibility of low prices filtering out across the world has the Russia-Qatar-Iran troika fearful.
BG Group, which has an export deal in place, believes the North American shale experience is unlikely to be replicated on such a scale elsewhere, providing a massive window of opportunity for exports.
Senior company executives told the Financial Times that they see growing demand from Asia and a huge looming supply gap.
This is potentially good news for countries that have bet large on gas but which are without shale reserves. One of these, Australia, has seen its appeal wane as high costs and delays hurt returns on investment, including the colossal Gorgon project.
Australia thinks its proximity to Asia will give it an advantage. But there is a feeling that first is first, and second is nowhere. Australia will hope the gas troika can stabilize the price and that the North American export projects hit delays.
The race is on.
SHELL SHIFTS NIGERIA FOCUS
Beneath Royal Dutch Shell’s disappointing headline earnings figure last week was a stark warning of a worsening security situation in Nigeria.
The globe-straddling oil major has had a presence in the West African nation for almost 80 years and has been exporting crude from there since the 1950s. But it is facing a crisis—production is being crimped to the tune of 100,000 barrels of oil equivalent each day, due to leaks and theft.
Shell is carrying out a review of its Nigerian operations that could lead it to exit the Ogoniland, a region where it has faced strident local opposition since the 1980s.
It is interested in buying some Chevron blocks, the Journal’s Benoît Faucon and Alexis Flynn report. They explain that this rare intra-major deal in Nigeria would mean Shell retains the capacity to feed its needs.
Shell won’t let go of Nigeria.
Crude-oil prices fell farther from a multi-month high on Monday, as traders and investors focused on a weak outlook for global demand. The Journal’s market report is here.