Future demand mandates that new LNG projects proceed
Exxon Mobil Gas & Power Marketing Company President Rob Franklin sat down and visited with Gas Processing, World Oil's sister publication, to explain his belief that the industry must find ways to satisfy strong LNG demand, even during low commodity prices. As companies balance the need for more gas to fuel a growing middle class while providing environmental benefits, they must find ways to economize projects.
Gas Processing: Can you explain the view that natural gas and LNG demand will grow strongly?
Mr. Franklin: First, global population is growing, and this growth will add another 2 billion energy consumers by 2040. Three billion people will join the middle class, and will help drive power generation as the fastest-growing part of energy demand.
Second, when considering the economic and environmental benefits of energy sources, natural gas checks all the boxes—it is abundant; available at scale; reliable and efficient as a source of energy; and it produces less carbon dioxide and other emissions than coal. This is why the demand for natural gas has grown faster than the overall demand for energy.
Within this picture of growth, more countries will begin to import LNG—from Poland to the Philippines—and LNG will be particularly important in the Asia-Pacific region. Through 2025, LNG demand is projected to rise at twice the rate of natural gas, in general.
GP: What are the potential costs when energy is under-supplied?
Mr. Franklin: When we consider that population and economic growth are driving energy consumption, the persistence of energy poverty robs families and communities of the opportunity to achieve their full potential.
According to the latest data, about one in five human beings still has no access to electricity. And about two out of five people around the world must rely on biomass, such as wood, charcoal or animal waste, for basic cooking and heating needs. The World Health Organization estimated that in 2012, alone, more than 4 million people around the world died from household air pollution.
For billions of people living around the world, simply gaining access to reliable, efficient energy is the means to a healthier and better life. For their communities, energy is the key to cleaner water; better sanitation; safer, more nutritious food; storage of medicines; and even light for education, study and personal advancement.
Expanding energy supplies, safely and responsibly, will be critical to the future for billions of people.
GP: Low oil prices already have affected some LNG producers’ key projects; what are the challenges for advancing new LNG, and how can they be addressed?
LNG projects remain highly capital-intensive. Securing credit-worthy off-take agreements and final investment decisions for new projects is a key challenge, but without new investments, the risk could become a supply-constrained market in the future.
For buyers, this means identifying projects advanced by companies that have the track records and abilities to manage financial, technical and operational risks, and bring LNG projects to timely completion. One example is the PNG LNG project, led by Exxon Mobil, with venture partners and positive government input. This project, which included navigating difficult terrain and maintaining extensive community involvement, was completed efficiently and began delivering LNG ahead of schedule.
Additional innovation in LNG will likely involve using technology to economize the links in the LNG value chain. Because these projects are so capital-intensive, economies-of-scale make a real difference, and encouraging innovation in this area will remain a primary focus for our industry, especially in the current environment. Projects from LNG suppliers, who invest in technologies to lower costs, maintain a long-term outlook, and remain financially sound, will be advantaged.
