HomeIndustry SectorsGenerationDepleting crude oil reserves drive natural gas industry

Depleting crude oil reserves drive natural gas industry

24 May 2012 – With the reserve-production ratios of developed nations such as the United States and Canada reaching alarming levels, and Middle Eastern resources depleting rapidly, there is widespread concern over crude oil future fuel replacement, according to a new report by natural resources research group GBI.

The report shows that while natural gas was not considered a utility in crude oil production’s glory days, the depletion of conventional crude oil reserves and regulatory emissions charges have started shifting consumption towards cleaner and more plentiful natural gas. This will therefore create a steady increase in gas demand.

New advancements in technologies such as liquefied natural gas (LNG) infrastructure and processes such as the liquefaction and regasification of natural gas have expanded gas’s possible uses, while the momentum of technological breakthroughs and efforts in this direction is being led by successes in exploration evidenced by an abundance of freshly-found reserves.

Difficulties associated with storage and transportation is currently inhibiting the growth of the natural gas market. Infrastructural limitations in logistics and transportation cause variations in natural gas prices across various regions. While an effective transportation infrastructure has been in place to transport crude oil for many years, this has not been the case with natural gas, which relies extensively upon liquefaction and regasification when faced with insufficient pipeline infrastructure. Pipelines also hold limitations in regards to terrain and distance. Offshore logistics via the LNG method provide a simpler and more efficient process while supporting cross-continental transport, but can be a cost-intensive operation owing to expensive logistics and tanker construction.

However, discoveries of natural gas in offshore Western Australia have created excellent business opportunities due to the proximity of the resources to emerging economies in the Asia Pacific, causing the LNG industry to explode. The huge consumer base, rapidly increasing demand and short distance to end-use markets make these new gas findings perfectly placed.

Australia is consequently expected to emerge as a leader in global LNG production by about 2017. Energy giants such as Royal Dutch Shell are planning to build liquefaction terminals on Western Australian shores to feed both the domestic markets and nations, such as China, India and Taiwan, demonstrating its financial commitment to the newly discovered reserves.

Though the global energy scenario is embracing natural gas, the fossil fuel shift is continuing only gradually, as global economies have long been accustomed to utilising crude oil. A total shift would happen only over decades, and demand the extensive rejuvenation and revamping of fuel consumption infrastructure. However, natural gas is still anticipated to emerge as a promising commodity over the coming years.