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CERAWeek: Wednesday–Day 3: Natural gas day, Secretaries of Energy: Canada, Mexico and the USA

By Todd Peterson

Petroleumworld 03 08 2018

Wednesday - Day 3

“CERAWeek by IHS Markit ” and its natural gas day. The theme is a bit of a continuation of previous days were natural gas is the cleanest fuel to transition the world to renewables. LNG will be one of the main ways to deliver natural gas to the market. The main market for natural gas going forward will be for power generation.

Today we heard a lot about the growing production of LNG from the USA and its impact on developing trading hubs in world markets. This new production is a result of the “shale gail” a term coined by Daniel Yergin several years ago. This new production from developers like Freeport LNG with no destination restrictions, I repeat, with no destination restriction, will be the reason for LNG truly becoming a commodity. This might worry traditional LNG producers with destination restrictions but will certainly help grow the market which is good for everyone.

We also got the opinion from several end users. Japan is still the largest buyer of LNG in the world. Companies like TEPCO, Chubu and Osaka Gas have invested large sums in gas distribution and power generation. To justify these investments both the buyer and producer needed long term contracts with no destination flexibility. They feel that because of traditional contracts it will be hard to develop trading hubs and futures trading in Japan.

Two opinions but it is trending to LNG becoming a commodity and just a matter of time?

There seems to be little doubt that the North America including Canada and Mexico have the natural gas reserves to support the LNG demand for millenniums.

There was also a presentation by GM and the future of electric cars and autonomous driving cars. GM is currently producing electric cars like the Volt and will be ramping up with new versions in the coming years. They also think that the carbon foot print of an electric car will come down as more power generation will come from renewables. In addition, GM expects to be producing a self-driving car by 2019.

NAFTA was center stage when the Secretaries of Energy from Canada, Mexico and the USA were together on the same panel. All agreed that there are long and strong relationships. Besides history, “we marry each other, we study together, we live together”. Rick Perry former Governor of Texas and current Secretary of Energy stated that we are stronger together than divided but that NAFTA needed to be updated.

Sec. Perry was asked about the USA leaving the Paris Accord and he explained President Trumps position as being a moral one. That making America great meant that the US having a strong economy is not only good for the US but also for the rest of the world. That the US reducing its carbon foot print by using more natural gas on its own and not being mandated by others is the moral way to act.

Separately, Pedro Joaquin Coldwell, Secretary of Energy from Mexico pointed out the importance of the energy reform and how that is attracting foreign investment. Thanks to the vision of President Peña Nieto, there is now a clear and stable legal and regulatory system to protect investors. As for NAFTA, he pointed out that this agreement is not one taking advantage of another but creates a mutually beneficial inter dependence.

There were no alarms today.

Story Todd Peterson special correspondent from Petroleumworld /
03 08 2018

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