In Depth: Report from the World Gas Conference in Amsterdam

On Tuesday, June 6, Shell chief executive Jeroen van der Veer opened the morning sessions of the World Gas Conference with a speech on the future of gas, noting in particular the important role LNG will play in that future. He specifically highlighted the fact that ninety percent of the LNG market is still comprised of long-term contracts, and emphasized that an LNG spot market will not develop quickly because “it is always a win-win [situation] to have a long-term relationship.”

In a panel on the growth and globalization of the LNG industry, Seichi Uchino of Tokyo Gas provided a survey of the LNG industry since 2001. He emphasized the growth of LNG trade, noting a 45% increase since 2001, and stated that 12% of the total LNG trade in 2005 consisted of spot transactions. Anwar Salim of Yemen LNG provided an overview of the Yemen LNG liquefaction project. He stressed Yemen’s geographic location between the East and West and its consequent, critical ability to supply both Asian and US/European markets. This position, however, presents challenges related to gas quality given the very different gas composition requirements in Asia and the US. As a result, Salim noted, the liquefaction facility’s design has been modified to accommodate both markets. He also noted that there is a clear plan to eventually replace with Yemeni nationals the expatriates that initially will be operating the facility.

On Wednesday morning, June 7, BG’s chief executive Frank Chapman delivered the morning address. Chapman discussed natural gas market growth in light of the increasing tendency in consuming countries to view natural gas as problematic (along with other hydrocarbons) in terms of security of supply, rather than as a clean energy source and a bridge to future reduction in fossil fuels. He cited BG’s “first-mover advantage in Atlantic Basin LNG” as one of the ways BG is responding to the changing gas business model. Chapman recognized that, of the LNG volumes originally contracted for the US market, BG has diverted a large percentage to higher-priced consuming markets since the third quarter of 2005; he predicted that this trend will continue in the future.

For more information, please contact David Wochner.

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