According to a new study by ODS-Petrodata Consulting & Research, the offshore oil and gas industry will undergo significant structural changes over the next decade as oil and gas companies globalize their natural gas exloration and production efforts and expand the world-wide LNG distribution system. Tom Kellock, ODS-Petrodata Senior Consultant, gave a brief overview of his latest LNG study,How LNG's growth will change today's offshore markets, at the Offshore Technology Conference. He said major E&P companies will seek large gas fields, and the regional nature of much of today's natural gas market will end. "LNG is a perfect fit for majors because there is no risk involved," Kellock said.
Kellock noted that LNG has no technological risk as it has been around for 40 years, it is envornmentally acceptable, there is no OPEC quota, and profits from long-term contracts, even in the US market, looks attractive, despite the high cost of liquefication plants. "LNG is a critical element of the worldwide energy equation," Kellock said. "However, the high cost of individual liquefacation projects, $5 billion to $12 billion will limit the major oil campanies' ability to pursue as wide a range of exploration projects as in the past."
Although only a small percentage of US natural gas demand is supplied in the form of LNG, it is already a key factor in the nation's supply/demand situation. "Increasing gas prices and decreasing LNG costs mean that LNG is already very competitive in the US, and it is likely to get more so," Kellock said. "Since the offshore rig count has not reacted to increased gas prices, increasing supplies of 'cheap' LNG may subsitute for potential GoM production, as well as filling any shortfall."
Kellock notes that in theory, projected LNG import capacity coupld supply the equivalent of the total natural gas output of the GOM's shallow waters within a few years. This could have a significant negative impact on the demand for jackup drilling rigs in the GoM.