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FeedsHome: June - July 2009 › Cover Story › Burning ambition
Burning ambition
01/06/2009 | Channel: Exploration & Production
With alternative energy sources to oil becoming increasingly sought after, Matt High examines the burgeoning natural gas market
Since the earliest stages of the oil and gas industry, considerable emphasis, both from those in the industry and the global energy market as a whole, has been centred around the exploration and processing of oil. For years this natural resource has been the backbone of the world’s energy demands and has helped to build the industry that we work in. However, as we move into a new era of exploration, one in which some of the world’s proven or ‘easy’ oil supplies are slowly running out, new energy sources will play an increasingly important role in the future.
Alongside renewables such as wind and wave, one of the most important alternatives to oil is natural gas - a resource that is in abundance across the world, with particularly large reserves in Russia, the Persian Gulf, Africa and Latin America. Over the last 20 years the practice of locating and developing natural gas as a viable energy source has transformed dramatically. Not only has an infrastructure capable of effectively sourcing, transporting and using gas grown rapidly, but increasing awareness of the environment and global climate change means that natural gas - often described as the cleanest fossil fuel - is continuing to gain popularity.
To find out more about the potential of natural gas I spoke with Sam Malin, chairman and CEO of Avana Group, and one of the pioneers behind gas and oil exploration in Madagascar. Originally drawn to the region when investigating possible gas discoveries, Sam is ideally placed to offer an insight into current gas exploration.
“The real impetus behind gas exploration has grown over a period of something like 30 years,” he explains. “In the late 1970s finding gas and exploiting it as an energy source was something that not many people in the industry considered or, to some extent, even wanted to do and this was chiefly due to the fact that a global infrastructure to support natural gas was just not available. Interestingly however, over the last five years the attitude towards what was previously considered stranded gas has changed. There is an ever-increasing LNG infrastructure and governments and companies are more geared towards using natural gas in the best possible way. What this means is that whereas in the past exploration companies were pretty exclusively looking for oil, today you have companies that drill only for gas, and which are capable of processing, transporting and using that gas. Thus, exploration and development of the world’s gas prone areas has been encouraged considerably.”
Of course, a growing infrastructure capable of exploiting natural gas has been a key factor in the changing attitude to the resource, but of equal importance is the simple fact that we cannot rely on oil forever, and therefore must be capable of locating and using other energy sources. No one in the industry can deny the fact that the world’s major oil consumers are slowly running out of oil supplies at given prices. Yes, we still have large oil supplies but these are in deeper locations, harsher environments, and require considerably more complex exploration operations.
“The diversification of energy supplies is certainly a large factor in gas being more commonly explored,” says Sam. “In essence, it really is a case of needs must, and the fact is that over the last ten to 15 years gas discoveries have easily replaced the gas reserves that have been used up - the same of which cannot be said for oil.”
As Sam mentions, gas exploration has gained popularity over the last decade or so, and in that time the pace of exploration has shown that there are vast reserves of the resource across the globe. Presently, the world’s largest proven gas reserves are located in Russia, which is also the largest natural gas producer in the world. Furthermore, the Middle Eastern countries, particularly Iran, Qatar and Saudi Arabia have large reserves, with the world’s largest gas field offshore Qatar estimated to have around 25 trillion cubic metres of natural gas.
Sam’s work in Africa with Avana means that he is aware of the potential for natural gas production in the country and its surrounding islands, but he is also keen to highlight other gas hotspots: “A couple of key regions in the industry at the moment are the Persian Gulf, as mentioned, and Latin America. The latter really stands out as being a very important area for gas exploration in the coming years. Russia has indeed been a very important sector in terms of quantities and security of supply, but I would not necessarily say it is a hotspot at the moment, particularly because the additional reserves being added there are relatively lower than the percentages found in Latin America and Africa.”
As Sam explains, Africa holds important gas reserves and as such has enormous potential for future development. As one of the pioneers in this region Sam was aware of this potential some years ago, as he explains: “My original involvement in Madagascar - where I founded Madagascar Oil - was actually to do with natural gas. I had been studying various data and investigating the economics of two potentially large gas discoveries off northwestern Madagascar with the idea of it being a possible LNG supply. Today this has become a reality and there is a great deal of exploration being carried out in a number of gas prone areas, particularly the west coast of Madagascar, but also on and offshore east Africa.
“There is a lot of potential and a lot going on, with gas being used for a number of applications,” he continues. “One of the good things about natural gas exploration is not only that it can be used for traditional energy supply, but it also has a number of other possible applications. For example, in Madagascar we are considering using natural gas as a useful energy source for other development projects. Various mining projects in Madagascar use natural gas as an energy source, but also as a hydrogen source. The advantage of gas being that if you are developing heavy oil then hydrogen can be used in refineries to make the oil lighter, and for other petrochemical applications.”
In fact, one of the great advantages of natural gas is that it has a number of important uses in any range of industries and applications. Alongside power generation, it can be used for domestic purposes and in the farming sector as an important feedstock and fertiliser. Furthermore, and perhaps most importantly with regards to environment concerns, compressed natural gas is recognised as a cleaner alternative to traditional automotive fuels such as petrol and diesel.
In the current economic climate, it is only natural to question the economic side of gas exploration. As mentioned earlier in the article, exploration has only become viable after an extensive infrastructure has been initiated and built upon, so we must question if gas exploration is any more expensive for companies, both in terms of locating the resource and the difficult task of extracting it. “I think that the fundamentals of exploration are the same as producing oil,” says Sam. “The key factor that companies must consider is that the moment that gas reaches the surface it becomes far more complicated. Whereas oil is a liquid, has a high energy density per unit volume and is naturally easy to transport, gas is far more difficult as it has a much lower energy density and may need to be pressed or liquefied before being transported. Naturally, this raises a number of various hurdles and complications, and of course it will have an effect on the amount of money involved for a company. Furthermore, other parts of the overall gas infrastructure, particularly natural gas pipelines, have many technical complexities as opposed to their oil counterparts.
“Because of this, and in relation to the economic side of things, I would say that we have to consider oil and gas complimentary rather than saying that gas can replace oil,” he continues. “It is safer to look at gas as an additional energy source that is fortunately now available to us. It is not more economically viable as some people say, but is rather an extra quiver to the energy bow, which was previously difficult to use and exploit successfully but is now booming.”
Sam is correct in his statement. It is too simple to consider natural gas as the answer to all of our future energy prayers - it is not a cheap, easy replacement for oil. Instead it’s an additional energy source with the potential to sustain the planet’s energy needs for the long-term future. Indeed, oil supplies are slowly running out and the ever-increasing infrastructure and global market being built around natural gas as an energy source ensures that the future will be sustainable.
As Sam concludes: “I think that building on the themes discussed, and the fact that the infrastructure to handle natural gas is improving all of the time, the outlook for gas exploration is positive. Companies can afford to invest money in it for the long term and expect a return on their investment and I can only see that trend continuing. And, as that does continue it is only natural that it will become ever more attractive to seek out further reserves of gas. Of course, this is not to say that it is more attractive than looking for oil, but relative to oil exploration it could offer more prospects simply because of the fact that oil is relatively stable at the moment, whereas the gas market is going through major acceleration and this certainly bodes well for the future of the industry.”
Avana Group
Sam Malin is chairman and CEO of Avana Group, an exploration company based Madagascar and the Seychelles, carrying out a range of operations in the surrounding region.
Alongside renewables such as wind and wave, one of the most important alternatives to oil is natural gas - a resource that is in abundance across the world, with particularly large reserves in Russia, the Persian Gulf, Africa and Latin America. Over the last 20 years the practice of locating and developing natural gas as a viable energy source has transformed dramatically. Not only has an infrastructure capable of effectively sourcing, transporting and using gas grown rapidly, but increasing awareness of the environment and global climate change means that natural gas - often described as the cleanest fossil fuel - is continuing to gain popularity.
To find out more about the potential of natural gas I spoke with Sam Malin, chairman and CEO of Avana Group, and one of the pioneers behind gas and oil exploration in Madagascar. Originally drawn to the region when investigating possible gas discoveries, Sam is ideally placed to offer an insight into current gas exploration.
“The real impetus behind gas exploration has grown over a period of something like 30 years,” he explains. “In the late 1970s finding gas and exploiting it as an energy source was something that not many people in the industry considered or, to some extent, even wanted to do and this was chiefly due to the fact that a global infrastructure to support natural gas was just not available. Interestingly however, over the last five years the attitude towards what was previously considered stranded gas has changed. There is an ever-increasing LNG infrastructure and governments and companies are more geared towards using natural gas in the best possible way. What this means is that whereas in the past exploration companies were pretty exclusively looking for oil, today you have companies that drill only for gas, and which are capable of processing, transporting and using that gas. Thus, exploration and development of the world’s gas prone areas has been encouraged considerably.”
Of course, a growing infrastructure capable of exploiting natural gas has been a key factor in the changing attitude to the resource, but of equal importance is the simple fact that we cannot rely on oil forever, and therefore must be capable of locating and using other energy sources. No one in the industry can deny the fact that the world’s major oil consumers are slowly running out of oil supplies at given prices. Yes, we still have large oil supplies but these are in deeper locations, harsher environments, and require considerably more complex exploration operations.
“The diversification of energy supplies is certainly a large factor in gas being more commonly explored,” says Sam. “In essence, it really is a case of needs must, and the fact is that over the last ten to 15 years gas discoveries have easily replaced the gas reserves that have been used up - the same of which cannot be said for oil.”
As Sam mentions, gas exploration has gained popularity over the last decade or so, and in that time the pace of exploration has shown that there are vast reserves of the resource across the globe. Presently, the world’s largest proven gas reserves are located in Russia, which is also the largest natural gas producer in the world. Furthermore, the Middle Eastern countries, particularly Iran, Qatar and Saudi Arabia have large reserves, with the world’s largest gas field offshore Qatar estimated to have around 25 trillion cubic metres of natural gas.
Sam’s work in Africa with Avana means that he is aware of the potential for natural gas production in the country and its surrounding islands, but he is also keen to highlight other gas hotspots: “A couple of key regions in the industry at the moment are the Persian Gulf, as mentioned, and Latin America. The latter really stands out as being a very important area for gas exploration in the coming years. Russia has indeed been a very important sector in terms of quantities and security of supply, but I would not necessarily say it is a hotspot at the moment, particularly because the additional reserves being added there are relatively lower than the percentages found in Latin America and Africa.”
As Sam explains, Africa holds important gas reserves and as such has enormous potential for future development. As one of the pioneers in this region Sam was aware of this potential some years ago, as he explains: “My original involvement in Madagascar - where I founded Madagascar Oil - was actually to do with natural gas. I had been studying various data and investigating the economics of two potentially large gas discoveries off northwestern Madagascar with the idea of it being a possible LNG supply. Today this has become a reality and there is a great deal of exploration being carried out in a number of gas prone areas, particularly the west coast of Madagascar, but also on and offshore east Africa.
“There is a lot of potential and a lot going on, with gas being used for a number of applications,” he continues. “One of the good things about natural gas exploration is not only that it can be used for traditional energy supply, but it also has a number of other possible applications. For example, in Madagascar we are considering using natural gas as a useful energy source for other development projects. Various mining projects in Madagascar use natural gas as an energy source, but also as a hydrogen source. The advantage of gas being that if you are developing heavy oil then hydrogen can be used in refineries to make the oil lighter, and for other petrochemical applications.”
In fact, one of the great advantages of natural gas is that it has a number of important uses in any range of industries and applications. Alongside power generation, it can be used for domestic purposes and in the farming sector as an important feedstock and fertiliser. Furthermore, and perhaps most importantly with regards to environment concerns, compressed natural gas is recognised as a cleaner alternative to traditional automotive fuels such as petrol and diesel.
In the current economic climate, it is only natural to question the economic side of gas exploration. As mentioned earlier in the article, exploration has only become viable after an extensive infrastructure has been initiated and built upon, so we must question if gas exploration is any more expensive for companies, both in terms of locating the resource and the difficult task of extracting it. “I think that the fundamentals of exploration are the same as producing oil,” says Sam. “The key factor that companies must consider is that the moment that gas reaches the surface it becomes far more complicated. Whereas oil is a liquid, has a high energy density per unit volume and is naturally easy to transport, gas is far more difficult as it has a much lower energy density and may need to be pressed or liquefied before being transported. Naturally, this raises a number of various hurdles and complications, and of course it will have an effect on the amount of money involved for a company. Furthermore, other parts of the overall gas infrastructure, particularly natural gas pipelines, have many technical complexities as opposed to their oil counterparts.
“Because of this, and in relation to the economic side of things, I would say that we have to consider oil and gas complimentary rather than saying that gas can replace oil,” he continues. “It is safer to look at gas as an additional energy source that is fortunately now available to us. It is not more economically viable as some people say, but is rather an extra quiver to the energy bow, which was previously difficult to use and exploit successfully but is now booming.”
Sam is correct in his statement. It is too simple to consider natural gas as the answer to all of our future energy prayers - it is not a cheap, easy replacement for oil. Instead it’s an additional energy source with the potential to sustain the planet’s energy needs for the long-term future. Indeed, oil supplies are slowly running out and the ever-increasing infrastructure and global market being built around natural gas as an energy source ensures that the future will be sustainable.
As Sam concludes: “I think that building on the themes discussed, and the fact that the infrastructure to handle natural gas is improving all of the time, the outlook for gas exploration is positive. Companies can afford to invest money in it for the long term and expect a return on their investment and I can only see that trend continuing. And, as that does continue it is only natural that it will become ever more attractive to seek out further reserves of gas. Of course, this is not to say that it is more attractive than looking for oil, but relative to oil exploration it could offer more prospects simply because of the fact that oil is relatively stable at the moment, whereas the gas market is going through major acceleration and this certainly bodes well for the future of the industry.”
Avana Group
Sam Malin is chairman and CEO of Avana Group, an exploration company based Madagascar and the Seychelles, carrying out a range of operations in the surrounding region.
