BG acquisition kick starts a fulcrum year for mega gas

2015 may well be remembered as the year when natural gas truly announced itself as the major energy fuel source. With the announcement that Shell are targeting a US$70 billion deal for BG Group, and in doing so increasing their current LNG capacity to around 33 million tpy, the big dollars to secure gas capacity are coming into sharp focus. Should the acquisition complete, Shell will have access to gas resources from Trinidad & Tobago to Tanzania. BG’s Queensland Curtis LNG project could also provide a viable option to develop the major Arrow coal-seam gas development in Australia.

Elsewhere in Australia, Chevron is expecting to see first production from the defining Gorgon project by Q3 this year. A massive LNG project with estimated capacity of 15.6 million tpy, Gorgon is expected to boost the company balance sheet for 40 years. Described as a black hole for Capex following well known cost overruns – expected to approach 50% of the initial US$37 billion budget – safe and timely execution this year will be critical not only for the company but for the future of Australian supply capacity. Similarly, 2015 is a big year for the Wheatstone LNG sister project as major modules are completed and project integration continues prior to 2016 operation.

After much anticipation, the world’s first floating LNG vessel is also expected to begin operations for Petronas in Q4. The FLNG 1 represents a major technological advancement in the monetisation of offshore gas assets. The success or otherwise of this unit, along with that of the under-construction Prelude (to begin operations for Shell in 2016), could signal the beginning of an era where stranded gas, marginal fields and major offshore gas discoveries can be processed offshore.

Acquisitions, major capital projects and large-scale technical developments suggest that 2015 is a fulcrum year for global gas supply.

Matt Loffman, Douglas-Westwood Houston

Adapted from a press release by David Bizley

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