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Oil and Gas World Brief Overview Part 2


The Gas Sector

Whilst gas field exploration and developments use similar technology to Oil, the gas sector is different economically. The high cost of transporting gas (up to ten times the cost of transporting oil) means that gas field developments cannot be considered in isolation, but need to be developed in conjunction with investment in transportation infrastructure (pipelines or liquefaction systems) and the related demand markets.

Thus gas prices and contracts are often specific to a locality - country or region. The exception to this is where the gas sector - markets and infrastructure are Well developed - as in the UK, Europe and US - where, with suitable de-regulation, there can be more of a genuine market-driven price.

There is increasing interest in gas world wide, with demand for gas currently growing and forecast to grow at a higher rate than oil over the next two decades. This is being driven partly by the availability of gas and its attractions on environmental grounds. It is also leading to increasing interest and development of Gas To Liquids technology in which gas is converted to a more concentrated liquid form to facilitate the exploitation of remote and smaller gas reserves.

Major oil companies such as Shell are moving into gas, seeing declining business opportunities in non-OPEC countries. Further, the importance of power generation as a market for gas is encouraging companies to become involved in both gas and power utilities.

Oil and Gas Field Development

Field developments will be matched by investment in major transportation systems, either liquefied Natural Gas(LNG) or Pipeline, in regions such as SE Asia, South America and linking Central Asia / Middle East to Europe.

There is a long term trend of refineries being built more in developing and Petroleum producing countries and away from developed, consuming, countries, as producers seek to increase their added value and developing countries seek to reduce their dependence on imports.

The developed world's refineries operated efficiently and profitably while Oil prices were low (cheap feedstock) and supply readily available. Subsequently, with tight oil supplies, higher feedstock prices and pressure from consumers on prices, they are operating less profitably. However, refineries in other parts of the world, especially SE Asia, have suffered from low demand in recent years, leading to continuing low margins.

Demand for new refineries is limited, generally driven by national policies on adding value with products from Crude Oil, or meeting national demand for refined products from indigenous production capacity. However, there is an ongoing requirement for the upgrading of refineries to improve and revise the product mix and to meet more exacting environmental standards. The demands for different products in the automobile sector are an important driver in this.

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