First Oil
CHIBA, JAPAN – When the folks at dmg events picked the Tokyo area a couple of years ago as the site for Gastech in 2017, they had no idea of the irony that their choice would take on as the conference/exhibition got underway. Think about it—not only is Japan the largest consumer of LNG, it is also where the global LNG industry really took off, after the first commercial delivery in 1964.
And yet, the worldwide LNG market is in a bit of a crisis, with oversupply flooding in and operators scrambling to cut costs and remain competitive. Wood Mackenzie was the “Official Knowledge Partner” of Gastech 2017, and the firm minced no words in referring to the LNG market as “irreversibly changed.” And analysts at Wood Mac have the data to back up their contention. Since 2015, seven LNG projects have gone online, and another 15 are under development. These analysts say that LNG output could grow more than 100 MMt, by 2020, to more than 360 MMt.
The Wood Mac analysts noted that “there is a widening range of suppliers democratizing access to LNG supply, not least infrastructure developers in the U.S. Global demand is growing, but more slowly than perhaps anticipated, and the market is fragmenting.” They also point out that large established centers of demand, like Japan and Korea, are in decline, yet newly emerging markets remain immature. Spot LNG prices have sunk to cyclical lows, driven down, as the analysts explained, by oil prices, cheap U.S. gas exports, and “the sheer volume of gas looking for a home.”
Remedies and processes. So, how do LNG operators go about solving the problem? The folks at Wood Mac think that “there are four main elements that need to be addressed: costs, responding to buyer needs, portfolio optionality, and infrastructure.” Indeed, these seem to be the core elements at play, but it is interesting to see how individual operators have their own terminology and processes to describe and handle the situation. Several of these were outlined by various executive speakers.
For instance, Abu Dhabi National Oil Company (ADNOC) CEO, Dr. Sultan Ahmed Al Jaber, who is also a UAE Minister of State, told attendees that his firm is utilizing “four pillars to enhance performance.” These pillars, he said, include people, performance, profitability and efficiency. He said that these pillars are tied to “an unwavering commitment to HSE and asset integrity.”
A different set of terminology was used by Maarten Wetselaar, Shell’s director of Integrated Gas and New Energies. He said that the LNG industry must follow a four-point agenda, to ensure that gas reaches its full potential as “a lower-carbon, cost-competitive energy solution.”
Wetselaar’s agenda includes:
- Encourage policies that target carbon emissions and air quality
- Cut costs and price gas competitively to make it as attractive as possible
- Be rigorous in measuring, reporting and repairing methane leaks
- Relentlessly open new gas markets.
Meanwhile, Chiyoda Corp. President and CEO Shogo Shibuya said his firm is utilizing “One Team Collaboration” to optimize operations. He said this has three components, including lifecycle engineering, making safety a core value, and achieving operational reliability.
Another version of the core aspects came from Mike Utsler, COO of Woodside Energy. He said that when it comes to developing people and projects, his company looks at it “through the lens of the four Ps—people, plant, process and delivered performance.”
One effect of the turmoil in the global LNG market is that operators’ efforts at digital transformation are being fast-tracked, as they strive to be ever-more efficient. Perhaps Bechtel Oil, Gas & Chemicals President Alasdair Cathcart had the most memorable line of Gastech, when he admitted, “I never thought I’d be sitting here, talking about how excited I am, about the investments we are making in data analytics.” 
