The beefy burly FT
Natural Gas Special Report:
Fuel rises to
challenge oil industry’s supremacy: “transitional fuel” to a potentially cleaner
alternative, projected to grow in demand at 2-3% per annum according to Shell—with
potentially faster growth given acceptance as auto-fuel.
The small-scale GLT
plants: Abbreviation of Gas-To-Liquid, this technique chemically alter
composition of gas molecules to yield high-quality, oil-like liquid. A plant to
produce such synthetic crude at 2k barrels/day from 20m standard cubic feet of
gas would cost about $200m to build.
Australia’s challenge
to secure the 2nd wave of investment: note that Chevron’s Gorgon
project, largest in Australian single resource history, overran by 40% to
$52bn. The lack of skilled labor and experienced subcontractors + strong Australian
dollar prove costly. Firms may need to move fast to secure LNG agreements
before buyers turn to other sources.
Innovative FLNG: floating
liquefied natural gas facility—produce, liquefy, store and transfer LNG (and
potentially LPG and condensate) at sea before carriers ship it directly to
markets. Shell is pioneering the effort and, if well executed, saves a ton on
middle processes.
What benchmark? Oil-indexed
contracts is a bit too crude, since regional gas prices are closely tied to the
local supply and demand dynamics that govern regional pipeline systems. This
potentially makes them more volatile than oil prices; US Henry Hub price, or
even the JKM (Japan-Korea Marker), could be the new benchmark for LT contracts.
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