Natural Gas – The Long Term Perspective

Abstract

The natural gas industry faces both an opportunity and a challenge in the 1990s – to expand its share of the energy market in the face of a number of constraints arising from historical, political and economic factors. The impetus for change comes from the growing environmental pressures exerted by those who believe that irreparable damage could be done to our planet by the increasing use of fossil fuels, and from the economic, strategic and technological pressures in a world increasingly dependent on energy. Opportunities for greater use of natural gas exist in both the OECD and the less-developed countries in the residential/commercial and industrial sectors, and in the generation of electric power. New technology, a large resource base and changing political attitudes to the uses for natural gas will all tend to expand the demand for gas. This will lead to growth in international trade in natural gas between OECD and its traditional suppliers. The scope for increased Middle East participation in this growth is constrained by two factors apart from the high transportation cost to market – political uncertainty, leading to concerns about the security of supply for the purchaser and the providers of finance; and the less dominant position of the Middle East in the gas business than in oil, leading to lower rewards and less influence in the market. In the developing countries the bulk of the supply will be indigenous gas, and its development will be critically dependent on these countries' success in encouraging and maintaining an active exploration and development programme. The lower overall profitability of natural gas projects compared with oil – less economic rent available – may inhibit the development of countertrade opportunities other than in the provision of the capital equipment for an export project.