Expect the promised benefits of natural gas to really begin hitting the North American economy in the second half of this decade, said Chevron Vice President of Supply and Trading Greg Vesey at the North American Gas Forum in Washington, DC this week.
It will take two to three years to complete construction of manufacturing facilities predicated on cheap and abundant natural gas supply, at which point industrial needs should dovetail with growing awareness among domestic customers to drive a demand boost. That increased demand, which Vesey conceded could result in a bump in prices as natural gas suppliers race to catch up, would mark the start of further additions to employment and a staved-off increase in energy costs that the sector has predicted since the extent of the continent’s shale gas resource became apparent a few years ago.
The rise in prices may not have to be significant to boost production. Natural gas supply has held relatively steady despite a drop-off in rig counts as transport infrastructure has been connected in 2013 and robust pricing for NGLs (natural gas liquids) has enabled gas producers to shrug off lower dry natural gas prices. Higher gas prices would mean the return of rigs to fields, as well as the opening of new production and transport routes, all of which points to a natural gas market that should remain well-supplied.
Significantly expanded liquefied natural gas exports are a near-inevitable part of the picture for the North American energy sector, Vesey and other panelists at the North American Gas Forum, hosted by Energy Dialogues LLC, said. Vesey said world demand was such that another five to six projects on the scale of the massive Gorgon facility that Chevron is developing in Australia might be required to meet it. Projects of that size involve billions of dollars and can take nearly twenty years from announcement to completion, so the race will be on to serve world markets with comparatively cheap and comparatively reliable natural gas supply from North America.
Much of the talk in Washington, DC was around the Department of Energy approvals of several new LNG export project applications, and how those projects would move forward now that the long-awaited federal clearance is complete (ed: albeit conditionally). Some of the most promising new areas of development, though, may be north of the border in Canada, where British Columbia minister for natural gas development Rich Coleman has promised a “safe haven” for the industry.
“We’re ‘all in’ for providing certainty for the industry in an atmosphere of fiscal responsibility,” Coleman said in opening the Forum. He was followed by Canadian Gas Association president Timothy Egan, who noted that the Canadian gas market was swiftly adjusting to the prospect of increased Northeastern US natural gas supply. In what he described as a dramatic shift, Canada will become a net importer of US natural gas by 2018 even as the promise of exports through terminals in British Columbia to serve Asian markets drives exploration and production expansion there.
