A flare burns off excess gas from a gas plant in Texas. Gas could stage a comeback as the hydrocarbon of the future. Reuters
A flare burns off excess gas from a gas plant in Texas. Gas could stage a comeback as the hydrocarbon of the future. Reuters
A flare burns off excess gas from a gas plant in Texas. Gas could stage a comeback as the hydrocarbon of the future. Reuters
A flare burns off excess gas from a gas plant in Texas. Gas could stage a comeback as the hydrocarbon of the future. Reuters

Why the gas industry's growth hinges on pricing and sustainability


Robin Mills
  • English
  • Arabic

The world gas industry has a problem: it is too good at producing and not good enough at marketing. Prices have collapsed, to the point that some exports are halting for a lack of willing buyers. Gas companies must get the pricing and sustainability of their product right, if their massive investments are to pay off.

Liquefied natural gas (LNG) has expanded enormously recently: demand grew 12 per cent last year, met by new plants in the US, Australia and Russia.

Most of the extra volumes went to China and Europe. China was switching coal-fired heating and industry to gas, a programme that has now slowed down, even before the coronavirus badly hit imports this year. Gas has helped push out coal in Europe, but much of the imports have gone into storage, which after a mild winter remains unseasonably almost full.

Now buyers have begun rejecting cargoes they cannot resell. Customers of Spain’s Naturgy chose to pay a fixed fee rather than take delivery of two LNG cargoes from Cheniere’s Texan facility. PetroChina has sought to invoke force majeure to avoid contractual penalties for not taking delivery. Still it’s debatable whether this is because of a shortage of workers to unload cargo as a result of the virus’s disruption of the logistics industry or simply because Chinese demand has collapsed.

US Henry Hub prices have slumped below $2 (Dh7.34) per million British thermal units (MMBtu), remarkably low for the usually high-demand winter period. Prices in Texas have gone negative – producers having to pay others to take their unwanted gas – leading to a surge in wasteful and environmentally destructive flaring. The usually pricey JKM market, for spot LNG delivered to East Asia, has dropped below $3 per MMBtu – the energy equivalent of oil selling for $18 per barrel.

The result is that, instead of capitalising on more expensive gas in the rest of the world, US producers have exported their low prices. Companies such as Centrica in the UK, and Chevron, Shell and America’s largest gas producer, EQT, have massively written-down the value of their gas assets. Chesapeake, one of the shale revolution’s standard bearers, has warned it may go bankrupt.

Yet gas companies remain very bullish on the longer-term. Shell’s annual LNG outlook, released on Thursday, shows a doubling of world demand by 2040, particularly in Asia. In 2018, the company committed to build the $40 billion LNG Canada plant. Total, BP and Middle Eastern national firms are turning to the fuel, cleaner and with apparently more assured long-term growth than oil.

Apart from a long line of new export projects from the US ranging from firm to speculative, other massive plans include Woodside’s $21bn for Browse LNG and $11bn for other expansions in Australia. Projects in Mozambique are advancing, and Mauritania and Senegal are new entrants to the race with a large joint gas-field operated by BP. Qatar recently delayed its search for international partners because of the price collapse, but still plans a huge expansion by 2024. Novatek’s $21bn Arctic-2 LNG facility in Russia was approved in September.

This huge wave of investment is in the teeth of a gale of oversupply. The companies hope that it will reach a safe haven of stronger demand in the middle of this decade. This faces three big problems.

First is the competition. The cost of solar and wind power in good locations, such as north-western Europe, the US Midwest and southwest, the Middle East and India, has fallen dramatically. At first, this will favour gas, as a flexible balancing fuel for variable renewable energy. But as coal power disappears entirely from markets such as the UK, and batteries improve, renewables will begin eating into the share of gas too.

Contrastingly, in countries such as China, India, Indonesia and Australia, coal is dirty and inflexible, but is strongly backed by influential incumbents, mining communities, and dependent businesses such as railways.

Second is the price. Most LNG is still sold on formulae linked to oil. This leads to a wide divergence of long-term LNG at $6 per MMBtu from spot LNG at $3 per MMBtu. Buyers cannot fully capitalise on low prices, and therefore cannot create demand by pushing out coal.

Third is the environment. Before it has had a chance to replace coal, gas is already under attack from environmentalists who decry its climate-warming methane leaks and deny that it can be a bridge to a sustainable energy system.

To meet these challenges, gas exporters need a combination of flexible pricing, demand creation and a cleaner vision. Gas will have to be sold on its merits, rather than linked to oil. That means making JKM and other LNG price markers more liquid and flexible, with tradable relations to continental benchmarks such as Henry Hub.

LNG will have to be cheap. That means new technologies and better project management to bring down the cost of the massive facilities that cool gas to a liquid so it can be shipped worldwide.

Gas companies need joint ventures for industries and power plants to buy their gas, in the emerging Asian giants as well as in new markets such as Africa. They have to build or commission pipelines to reach inland markets, and lobby for supportive regulation, including carbon prices and air pollution caps.

Finally, gas will have to be sustainable. Beyond just cutting methane leaks and flaring, companies need to embrace large-scale carbon capture and storage, as Adnoc is moving towards, and pioneer hydrogen or other decarbonised fuels. Reaching the promised bright future for gas is not about surfing a wave of demand but navigating through a narrow and perilous strait.

Robin M. Mills is CEO of Qamar Energy, and author of The Myth of the Oil Crisis

Dengue%20fever%20symptoms
%3Cul%3E%0A%3Cli%3EHigh%20fever%3C%2Fli%3E%0A%3Cli%3EIntense%20pain%20behind%20your%20eyes%3C%2Fli%3E%0A%3Cli%3ESevere%20headache%3C%2Fli%3E%0A%3Cli%3EMuscle%20and%20joint%20pains%3C%2Fli%3E%0A%3Cli%3ENausea%3C%2Fli%3E%0A%3Cli%3EVomiting%3C%2Fli%3E%0A%3Cli%3ESwollen%20glands%3C%2Fli%3E%0A%3Cli%3ERash%3C%2Fli%3E%0A%3C%2Ful%3E%0A%3Cp%3EIf%20symptoms%20occur%2C%20they%20usually%20last%20for%20two-seven%20days%3C%2Fp%3E%0A
F1 The Movie

Starring: Brad Pitt, Damson Idris, Kerry Condon, Javier Bardem

Director: Joseph Kosinski

Rating: 4/5

The specs
  • Engine: 3.9-litre twin-turbo V8
  • Power: 640hp
  • Torque: 760nm
  • On sale: 2026
  • Price: Not announced yet

A Bad Moms Christmas
Dir: John Lucas and Scott Moore
Starring: Mila Kunis, Kathryn Hahn, Kristen Bell, Susan Sarandon, Christine Baranski, Cheryl Hines
Two stars

UAE currency: the story behind the money in your pockets
UAE currency: the story behind the money in your pockets
WHAT IS A BLACK HOLE?

1. Black holes are objects whose gravity is so strong not even light can escape their pull

2. They can be created when massive stars collapse under their own weight

3. Large black holes can also be formed when smaller ones collide and merge

4. The biggest black holes lurk at the centre of many galaxies, including our own

5. Astronomers believe that when the universe was very young, black holes affected how galaxies formed

While you're here
The specs

Engine: 3-litre twin-turbo V6

Power: 400hp

Torque: 475Nm

Transmission: 9-speed automatic

Price: From Dh215,900

On sale: Now

Takreem Awards winners 2021

Corporate Leadership: Carl Bistany (Lebanon)

Cultural Excellence: Hoor Al Qasimi (UAE)

Environmental Development and Sustainability: Bkerzay (Lebanon)

Environmental Development and Sustainability: Raya Ani (Iraq)

Humanitarian and Civic Services: Women’s Programs Association (Lebanon)

Humanitarian and Civic Services: Osamah Al Thini (Libya)

Excellence in Education: World Innovation Summit for Education (WISE) (Qatar)

Outstanding Arab Woman: Balghis Badri (Sudan)

Scientific and Technological Achievement: Mohamed Slim Alouini (KSA)

Young Entrepreneur: Omar Itani (Lebanon)

Lifetime Achievement: Suad Al Amiry (Palestine)

Volvo ES90 Specs

Engine: Electric single motor (96kW), twin motor (106kW) and twin motor performance (106kW)

Power: 333hp, 449hp, 680hp

Torque: 480Nm, 670Nm, 870Nm

On sale: Later in 2025 or early 2026, depending on region

Price: Exact regional pricing TBA

Bahrain%20GP
%3Cp%3EFriday%20qualifying%3A%207pm%20(8pm%20UAE)%3C%2Fp%3E%0A%3Cp%3ESaturday%20race%3A%207pm%20(UAE)%3C%2Fp%3E%0A%3Cp%3ETV%3A%20BeIN%20Sports%3C%2Fp%3E%0A
Dr Afridi's warning signs of digital addiction

Spending an excessive amount of time on the phone.

Neglecting personal, social, or academic responsibilities.

Losing interest in other activities or hobbies that were once enjoyed.

Having withdrawal symptoms like feeling anxious, restless, or upset when the technology is not available.

Experiencing sleep disturbances or changes in sleep patterns.

What are the guidelines?

Under 18 months: Avoid screen time altogether, except for video chatting with family.

Aged 18-24 months: If screens are introduced, it should be high-quality content watched with a caregiver to help the child understand what they are seeing.

Aged 2-5 years: Limit to one-hour per day of high-quality programming, with co-viewing whenever possible.

Aged 6-12 years: Set consistent limits on screen time to ensure it does not interfere with sleep, physical activity, or social interactions.

Teenagers: Encourage a balanced approach – screens should not replace sleep, exercise, or face-to-face socialisation.

Source: American Paediatric Association
Other workplace saving schemes
  • The UAE government announced a retirement savings plan for private and free zone sector employees in 2023.
  • Dubai’s savings retirement scheme for foreign employees working in the emirate’s government and public sector came into effect in 2022.
  • National Bonds unveiled a Golden Pension Scheme in 2022 to help private-sector foreign employees with their financial planning.
  • In April 2021, Hayah Insurance unveiled a workplace savings plan to help UAE employees save for their retirement.
  • Lunate, an Abu Dhabi-based investment manager, has launched a fund that will allow UAE private companies to offer employees investment returns on end-of-service benefits.
Series info

Test series schedule 1st Test, Abu Dhabi: Sri Lanka won by 21 runs; 2nd Test, Dubai: Play starts at 2pm, Friday-Tuesday

ODI series schedule 1st ODI, Dubai: October 13; 2nd ODI, Abu Dhabi: October 16; 3rd ODI, Abu Dhabi: October 18; 4th ODI, Sharjah: October 20; 5th ODI, Sharjah: October 23

T20 series schedule 1st T20, Abu Dhabi: October 26; 2nd T20, Abu Dhabi: October 27; 3rd T20, Lahore: October 29

Tickets Available at www.q-tickets.com

Stat Fourteen Fourteen of the past 15 Test matches in the UAE have been decided on the final day. Both of the previous two Tests at Dubai International Stadium have been settled in the last session. Pakistan won with less than an hour to go against West Indies last year. Against England in 2015, there were just three balls left.

Key battle - Azhar Ali v Rangana Herath Herath may not quite be as flash as Muttiah Muralitharan, his former spin-twin who ended his career by taking his 800th wicket with his final delivery in Tests. He still has a decent sense of an ending, though. He won the Abu Dhabi match for his side with 11 wickets, the last of which was his 400th in Tests. It was not the first time he has owned Pakistan, either. A quarter of all his Test victims have been Pakistani. If Pakistan are going to avoid a first ever series defeat in the UAE, Azhar, their senior batsman, needs to stand up and show the way to blunt Herath.