The global gas industry is currently undergoing radical changes in terms of both prices and production, especially in light of the massive new production levels of liquefied natural gas (LNG) since mid-2009 in Russia, Qatar, Indonesia and Yemen, estimated at 7.7 million cubic feet per year (or 59 million tons annually). This number will even rise further with Qatar Gas beginning production from the giant LNG Train Six, which has a production capacity of nearly 8.7 million tons per year (in contrast with the traditional production trains which have a capacity of approx. three million tons annually). This will boost Qatar's annual LNG output to 77 million tons annually in the next few weeks, making Qatar the world's top LNG producer. In a statement he made in Singapore on the first of November, the Qatari Energy Minister Abdullah al-Attiyah predicted natural gas supply and demand to equalize in three years, in light of increasing demand in Asia, especially in China and India, which will absorb the recent increases in supply (as is known, Asian demand for gas currently amounts to half of global demand). At present, Qatar supplies India with 5.7 million tons of LNG annually, and China with around 5 million tons, through long-term gas contracts. Another challenge to the gas industry is shale gas production in the United States, and the negative impact of this new type of gas in the international gas trade, as it has led to short-term reductions in gas prices, and has given the United States the opportunity to begin exporting gas to Europe, having been a gas importing country itself until recently. While gas prices have fallen in the U.S., they have maintained their levels in both Europe and Asia. However, the shale gas industry is facing considerable opposition in the United States on account of its pollutant effects that especially affect water sources. A good example of such opposition to shale gas is the decision recently taken by the City Council of Pittsburgh in Pennsylvania to ban drilling and exploration for shale gas within city limits, for fear of contaminating water sources. This is despite the fact that several energy companies have purchases large tracts of land there to drill in them. Other significant developments include the construction of gas pipelines over large distances of Russia and some countries of the Caspian Sea, destined for Europe and China. These pipelines open broad horizons for exportation, especially as they head eastward or westward, over thousands of kilometers, and as they are supplied with natural gas from several countries (e.g. the Nabucco pipeline is planned to receive gas supplies from Azerbaijan, Egypt, Iraq and Iran, to be delivered to the European market as an alternative to its heavy reliance on Russian gas). In truth, this large demand for gas is mainly attributed to the fact that natural gas is widely considered to be a more environmentally friendly hydrocarbon source of energy. This makes natural gas an extremely desirable fuel for power generation, in lieu of using coal, fuel oil or nuclear energy. Today, we find that the majority of new power plants in the world operate on gas, instead of other types of fuels. Hence, natural gas complements petroleum, and does not compete with it, as new power plants hardly use any petroleum products, except for old plants. Natural gas is also being used in desalination plants, which are gradually increasing in numbers in light of the scarcity of fresh water worldwide, while transportation is the primary sector when it comes to the consumption of petroleum products. While natural gas is also being used in vehicles at present, this is confined to a very limited scope, mostly in public transport buses or taxis. But shifts and changes are nothing new for the gas industry. This industry has faced many fundamental changes in the past few decades, most notably, the adoption of spot contracts and spot sales for LNG, rather than the long-term contracts used previously, where 25-year agreements used to be concluded over the quantities to be exported, and the price of these supplies during the designated period. In addition, the United States changed the way it prices gas by separating gas prices from those of oil. This is while bearing in mind that relating gas prices to oil prices is the method currently used worldwide in pricing gas, and the method most favored by producing countries. However, several radical changes that took place have significantly helped reduce gas prices, thereby increasing consumption of natural gas – changes such as the adoption of giant LNG train like the one recently launched by Qatar Gas, not to mention the use of LNG supertankers which transport nearly double the quantities usually carried by conventional tankers. The use of technology to increase the scope of production, liquefaction and transportation has also helped reduce the costs of gas production. New technology also allows the discovery of gas in deep sea waters, at the depth of around five thousand feet below the surface. Meanwhile, the most important indicator of the success of the gas industry remains the extent of the future expansion of the consumption of natural gas. A recent study published by Shell in this regard predicted that Chinese consumption of gas will increase threefold by 2030. The study bases its predictions on the fact that thousands of kilometers in gas pipelines are planned to be built in China. The study also forecasts that China's consumption of gas will overtake that of Japan by 2015, and that global gas consumption will grow by about 2 percent over the next few decades, while annual demand for LNG will increase by about six percent. *. Mr. Khadduri is an energy expert
