LNG – Balancing domestic and
export needs
World Gas Conference
Paris, France
Maarten Wetselaar
Executive Vice President, Shell Integrated Gas, Royal Dutch Shell plc
June 3 2015
Maarten Wetselaar speech at the 2015 World Gas Conference in Paris
Appointed the Executive Vice President of Shell Integrated Gas on
January 1, 2013 and based in Singapore, Maarten is
accountable for delivering and growing Shell’s global Integrated
Gas business, including Liquefied Natural Gas (LNG), Gas-ToLiquid (GTL) and unconventional business outside the Americas.
China, Russia, Australia and Qatar are under Maarten’s direct
leadership as well as key gas operations in over 10 countries.
Joining Shell Downstream in 1995, Maarten worked in Europe,
Brazil and Africa where he became Vice President of Finance &
Information Technology.
He then moved to Upstream. He was Vice President Finance in
the Middle East, and Vice President Finance and Commercial for
Russia/CIS. In 2009 he became Executive Vice President
Finance, Upstream International.
Maarten is Dutch with an Economics degree from Groningen
University and a post-doctorate degree in Controlling from VU
University Amsterdam.
Maarten is married with three children. In addition to spending
time with his family and friends, Maarten likes reading, music,
arts, football, sailing and golf.
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Maarten Wetselaar speech at the 2015 World Gas Conference in Paris
Countries with natural gas resources have to find ways to balance meeting domestic
energy demand with generating revenue by exporting to the global LNG market.
In his speech to the World Gas Conference, Maarten Wetselaar focuses on three
countries with gas reserves – Indonesia, Nigeria and Iraq – and their efforts to
achieve this balance.
Ladies and Gentlemen, good afternoon. It’s
a pleasure to be here.
I’d like to spend some time today talking
about balance. Specifically, how countries
with natural gas resources can balance
meeting domestic energy demand with
generating revenue by exporting LNG.
Of course, countries with energy resources
have always had to grapple with this issue.
But striking the right balance is now more
important than ever. Because demand for
electricity from their citizens is increasing
day by day. And the growing number of
countries importing LNG is boosting
demand outside their countries too. These
twin developments represent an opportunity
as well as a trade-off for policy and
decision makers.
Demand, impact and access
But before that, I’d like to look briefly at two
major challenges facing the global energy
system. Challenges that impact both LNG
importing and exporting countries.
How to meet increasing demand for energy,
driven by a growing global population and
rising living standards, while reducing
environmental impacts such as greenhouse
gas emissions and air pollution.
The challenge of meeting demand is best
illustrated by the reality that one in six
people on the planet still lacks access to
electricity. Affordable energy access is a
human right, which everyone deserves.
I am convinced that we can generate more
energy for the world’s citizens, and at the
same time reduce impact on the
environment. But it won’t happen overnight.
Pragmatic thinking is essential as our energy
system and economies transition to a lowcarbon future, using multiple sources of
energy – oil, gas, nuclear, and renewables,
and hopefully less coal.
Renewables will be a vital source of energy
in the future, but the world will need other
sources of energy because of a host of
challenges that include intermittency,
availability, volume, storage, system
stability, integration and investment costs.
“One in six people
on the planet still
lacks access to
electricity.”
Natural gas has a crucial role to play in
partnering with renewables, both now and
in the long term. It’s abundant. It produces
half the carbon dioxide of coal. And, when
sold as LNG, gas is a global commodity.
Natural gas is also one of the few energy
sources that can meet all our energy needs;
electricity, heating, plastics and fuels, at
reasonable cost to the end user.
Supply and demand
There’s broad agreement within our industry
that the outlook for LNG supply is strong.
The number of countries exporting LNG will
rise, with the bulk of new supply coming
from Australia, North America and East
Africa.
On the flip side, there’s more uncertainty
when it comes to LNG demand. Yes,
demand will grow. But is there going to be
enough to match this new supply that’s
being developed?
Shell believes there will be. We expect
LNG demand to rise by 5% per year over
the next couple of decades. That’s more
than double the 2% growth in gas demand
over the same timeframe.
“[Shell] expects
LNG demand to
rise by 5% per year
over the next couple
of decades. That’s
more than double
the 2% growth in
gas demand over
the same
timeframe.”
Maarten Wetselaar speech at the 2015 World Gas Conference in Paris
There are three reasons for this exciting
outlook for the LNG industry.
Firstly, new markets are opening up. So far
in 2015, Pakistan and Egypt have begun
importing LNG. Jordan and Poland are
expected to start later this year. And by
2030, Shell expects more than 50 countries
will be importing LNG, up from around 30
today.
Secondly, LNG has evolved from being a
fuel for the electricity supply of a limited
number of countries to a truly global
commodity with an expanding range of
uses, including for powering transport.
Thirdly, I expect Paris, the city that hosts our
conference this year, to be the location
where later this year world leaders reinvigorate their commitment to a low carbon
future when they meet at COP21. With
measurable and ambitious targets for every
economy. Any pragmatic and affordable
low carbon future has the rapidly expanding
use of gas and LNG as a core element. It is
our role to assure that the required supplies
are available and affordable.
For importing countries, LNG is a key source
of energy to help meet their rising demand.
Exporting countries need to strike a balance.
On the one hand, they need to supply
power to local people and businesses. This
requires building infrastructure, such as
pipeline networks, as well as a domestic
market structure that encourages investment.
And on the other hand, these countries have
the opportunity to generate substantial
revenue by exporting gas to the global LNG
market.
I’ll illustrate this point by focusing on three
countries with gas reserves, their efforts to
achieve this balance, and the role of LNG.
Indonesia
Firstly Indonesia, home to the world’s fourth
largest population, where the government
faces the challenge of supplying energy to
people living on thousands of islands.
Here, the balance is moving towards
importing LNG to meet domestic demand,
while at the same time advancing projects
to develop the country’s gas resources for
export further down the line.
Diesel is currently the main fuel source in
Indonesia. But it’s expensive when used to
generate power. Here’s where LNG comes
in, with two big benefits. Gas is cheaper to
produce than diesel. And, as you know, it
emits fewer emissions.
That’s why the national electricity company,
PLN, has started a project using LNG to fuel
numerous gas-fired power plants. This will
help meet domestic demand in the many
islands that Indonesia comprises of. Such
gas-fired power plants typically take much
less time to build compared with coal
plants. They also take up half as much land.
This project is initially focusing on the
Central Indonesia region. LNG import
facilities and a distribution network of small
re-gas terminals will have to be built. Gas,
in liquid form, will then be delivered to these
terminals by a flotilla of LNG ships. If this
phase is successful, it could be replicated to
other parts of Indonesia’s archipelago.
This could also become a model for other
island-rich areas to deploy such as the
Philippines and the Caribbean.
While importing LNG will help meet
domestic energy demand, Indonesia is also
planning to develop its own gas reserves,
and export them as LNG.
Inpex, the Japanese oil and gas company,
and Shell are working together to develop
the Abadi gas field in the Arafura Sea. We
are leveraging our floating LNG expertise,
as well as our project delivery capabilities,
to support the project.
Nigeria
Next to Nigeria. As you know, it’s an
important producer of LNG. But Nigeria
also faces a huge challenge of increasing
power supply to the country’s citizens, the
majority of whom lack reliable electricity.
“Diesel is currently
the main fuel source
in Indonesia. But it’s
expensive when
used to generate
power. Here’s
where LNG comes
in, with two big
benefits. Gas is
cheaper to produce
than diesel. And, as
you know, it emits
fewer emissions.”
Maarten Wetselaar speech at the 2015 World Gas Conference in Paris
To put this challenge in perspective, Nigeria
has less than 10% of South Africa’s
electricity generation capacity, despite
having more than three times the population.
A substantial step-up in domestic gas-fired
power generation could result in a stepchange for economic growth and address
the energy poverty that still scars many parts
of Nigeria.
We are committed to working with the
Nigerian government to increase gas supply
to the domestic market. For example, the
Assa North / Ohaji South project has the
potential to be one of the largest domestic
gas projects in the country, supplying
500MMscf per day. Broad and sustainable
domestic growth can be unleashed by
further reforming the domestic gas and
power markets.
There is huge demand for electricity in Iraq.
To meet this demand and stop the blackouts
many experience on a daily basis, a key
government priority is increasing the use of
gas for domestic supply.
A lot of the gas produced during oil
production in Iraq is currently flared. Not
only is this is bad for the environment. It also
deprives Iraqis of gas which could be used
to power their homes.
At the Basrah Gas Company, Shell is
working with South Gas Company and
Mitsubishi to capture gas, so it can be used
in domestic power generation.
Given Nigeria’s very substantial gas
reserves, the LNG and domestic gas
opportunities can be advanced in parallel,
and indeed Shell is working with the
Nigerian government on both these fronts.
Today, Basrah Gas Company’s gas
processing capacity is around 650
MMscf/d. By the end of this decade, it is
expected to grow to an estimated 2 bcf/d.
This will not only be a very substantial
contribution to energy security for the people
of Iraq, it will also avoid around 68 mpta of
CO2 emissions. This is equivalent to annual
emissions from more than 14 million cars.
Let’s remember, the government generates
substantial income from exporting Nigeria’s
gas reserves as LNG. Three quarters of
overall government revenue comes from oil
and gas. And last year, NLNG – Nigeria
LNG company – provided around 7% of
global LNG supply.
Conclusion
In conclusion: faced with this growing
demand, countries with gas resources must
strike a balance. Between providing access
to responsible energy to their own people,
and supplying low-carbon gas to energyhungry countries.
Together with the government owned
Nigerian National Petroleum Corporation
and other shareholders in NLNG, we’re
also looking at ways to further expand the
plant on Bonny Island with a seventh
liquefaction train, so Nigeria can maintain
its strategic position in the growing global
LNG market.
This balance has never been easy to
achieve. And with energy demand going
firmly in one direction, the pressure is more
acute than ever. Governments should ensure
that domestic markets are structured to
attract investment and gas supply. On top of
that the expanding global LNG market
offers resources holders an opportunity to
grow both domestic markets as well as
exports, and strike the right balance.
Iraq
The third country I’ll focus on is Iraq, where
the scales are balanced in favour of meeting
domestic power demand. Then, and only
then, will the country’s gas resources be
used to generate revenue, by being
exported as LNG or by pipeline.
Thank you very much.
“A substantial stepup in domestic gasfired power
generation could
result in a stepchange for
economic growth
and address the
energy poverty that
still scars many
parts of Nigeria.”
“There is huge
demand for
electricity in Iraq.
To meet this
demand and stop
the blackouts many
experience on a
daily basis, a key
government priority
is increasing the use
of gas for domestic
supply.”
Maarten Wetselaar speech at the 2015 World Gas Conference in Paris
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