Oil Companies Defend Big Bets on Gas
October 17 2017 - 11:34AM
Dow Jones News
By Lynn Cook
LONDON--The world's biggest oil companies have defended their
giant bets on natural gas at a major energy conference, saying
demand will soon emerge for the huge supplies of fuel they are
bringing to the market.
Robert Franklin, Exxon Mobil Corp.'s vice president in charge of
gas and power, said natural gas demand was rising in China, where
imports of liquefied natural gas are up 40% in the past year. He
said he believed India would follow China's lead soon, recalling
talks this month among energy executives and Indian Prime Minister
Narendra Modi who sought ideas for switching India to a gas-based
economy.
"If I'm bullish about gas generation in China and India, then
I'm bullish about natural gas," Mr. Franklin said at Oil &
Money, a major energy conference in London that draws executives,
investors and government officials.
Exxon and its rivals have invested over $700 billion dollars in
new natural gas projects from the U.S. to Africa to Australia from
2007 to 2016, unleashing huge new quantities of gas. Exxon and
Royal Dutch Shell PLC both say they produce more gas than oil now,
and the same will be true for BP PLC within a decade--much of it
via liquefied natural gas, which can be shipped around the world
like oil.
That new potential for natural-gas supply comes as big
petrostates like Qatar and Russia also plan to produce more gas.
The flood of supply has depressed LNG prices and raised uncertainty
about where all the new natural gas will be consumed. Many
countries don't have the infrastructure to import the fuel or the
money to make the required changes.
Developing LNG markets still lack a coherent business model,
said Charif Souki, chairman of Tellurian, which develops
natural-gas projects. "We lack the infrastructure," Mr. Souki
said.
The question's urgency was underscored by an entire day of talks
at Oil & Money about natural gas, the first time the organizers
devoted have a day to a fuel source other than crude oil.
The fuel is widely seen as a relatively low-emissions bridge
from dirtier fuels like coal to a future where renewable energy
sources like wind and solar become more prominent. The U.S. remains
the largest emitter of CO2 but has reduced its carbon output 21%
over 10 years by shutting old coal-fired power plants and launching
new natural-gas power stations.
"Governments around the world are getting on board in boosting
gas supply and use," said Ajay Shah, a vice president with Shell
Energy Asia.
Fossil-fuel producers underestimate renewables growth at their
peril, said Otto Waterlander, a senior partner at McKinsey and
Company. The industry has consistently bet renewable energy sources
would grow more slowly than they actually have, and it has
underestimated how reliable those greener energy sources would
be.
"Let's be a bit more cautious on what's coming next," he
said.
Mr. Franklin of Exxon took aim at two policies that have dented
the outlook for natural-gas growth: Trump administration
climate-change moves and European regulations favoring
renewables.
Mr. Franklin bemoaned the U.S. move to exit from the Paris
climate accord, saying that the company's chief executive Darren
Woods "implored" President Donald Trump not to walk away from the
deal to curb greenhouse gas emissions. And he called European
policies to promote solar and wind power growth "frankly
ineffective subsidies," saying gas-fired power stations do more to
help the environment.
The White House didn't immediately respond to a request for
comment. Mr. Trump has said he is open to negotiating a better
climate deal for the U.S. The Trump administration has also made
moves to support the coal industry.
Sarah Kent, Georgi Kantchev and Christopher Alessi contributed
to this article.
Write to Lynn Cook at lynn.cook@wsj.com
(END) Dow Jones Newswires
October 17, 2017 11:19 ET (15:19 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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