Natural Gas – Lots of ex-North American Activity!!
In this note, I should comment on global natural gas. Despite apparent oversupply (everywhere!!), via both heavy LNG startups and relatively weak demand (Europe, Japan/Korea), the product has a very bright future. Pricing is, understandably, weak, with oil/gas ratios of 20:1 in North America, 13:1 in Europe, and ‘only’ 7:1 (spot) in China. This is, and will probably continue to, encourage substitution for both oil and coal. However, Chinese gas consumption will quadruple over the next decade, fed by pipeline product from Western China, Turkmenistan, and Australian LNG, with the possibility of extensive shale gas beyond 2020. Europe’s supply outlook is grim, with dramatic deterioration in available gas from the aging North Sea fields, providing an opportunity for yet more LNG, pipelines, local shale gas, and supply from Gazprom/Russia. There are several new, promising, gas supply prospects over the next decade. These include Chinese and Russian shales, Iraqi associated gas (now flared), and in process Australian LNG from coal seam methane. Shell seems to be the major with the most forward-thinking and diversified exposure to these opportunities.