London — Shell sees the need for investment new LNG projects to meet the fast-growing demand for the fuel in the coming decades, the oil major's CEO Ben van Beurden said Tuesday, reiterating the risks of an LNG "supply crunch" by the mid-2020s.
Shell expects natural gas demand to grow at an average rate of 2% a year, twice the rate of total worldwide energy demand, in the coming years with demand for LNG alone to grow at 4% a year until 2030, van Beurden told the Oil and Money conference in London.
"It's always hard to really see where the demand curve is. Demand is not really visible in LNG," he said. "I think, if you look into the 2020s with our investments with some other plans that we are aware of [the Qatari plans], I think that will simply also not be enough to close the gap. We will we need more things to continue to close that gap."
Shell, in its latest LNG outlook published in February, said the world risks a supply crunch for the fuel by the mid-2020s due to the collapse in LNG sector investment since the 2014 oil price slump.
Qatar, the world's largest LNG supplier and second-biggest gas exporter after Russia, is pushing ahead with plans to increase its LNG output by 30%, helped by an expansion of a fourth train at Qatar Petroleum's LNG plant.
Asked if Shell would be interested in becoming a partner in the expansion, van Beurden said, "I think we have a very compelling set of attributes that we can bring to the partnership... we will be putting forward a proposition when we are invited to do so."
While Shell expects to continue to grow its wider gas business in the coming years, van Beurden said he sees Shell's gas sector expansion becoming "a little less dramatic" than in recent years, given that gas already makes up half of Shell's upstream production volumes and absorbs one-third of its capital spending.
On Shell's recent FID for its Canada LNG plant, van Beurden said he is confident that the project will remain competitive on a capital spending and production cost basis, due to intensive work to bring down construction costs.
The use of modular construction methods, standard industry equipment and the fact that Canada will be built on a brownfield site mean the cost will come in at a "competitive" $1,000 per mt/year, van Beurden said.
He said the fiscal framework provided by the Canadian government also helped ensure the project could go ahead.
"We have spent more time on Canada LNG than other projects in terms of de-risking it. If you just look back over the last 4-5 years, the track record we have on delivering projects on budget and ahead of schedule is quite compelling," he said.
Van Beurden declined to confirm reports of headline capital costs of $20-$25 billion for the projects, saying the figures were the result of "someone doing the sums in a certain way."
"Let me be quite clear, LNG Canada would not have made it if it had not had such a compelling case on costs. So it should be. Even at a time of $70, $80 or even $90 oil," he said.
Canada LNG is expected to come on stream in the mid-2020s and will allow LNG from the project to reach Tokyo in half the time of a cargo from the Gulf of Mexico, he said.
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