Transformation of global energy markets: The future roles of GTL and LNG

M.H. Koelmel, Sasol Chevron Consulting Ltd., United Kingdom Abstract

During the past decade, the gap between domestic crude oil production and the consumption of refined products has increased significantly in key North American and Asian/Far East markets, increasing the dependence of these markets upon imported crude oil. In North America and Asia/Far East, this trend is expected to continue during the next decade. The North America and Asia/Far East regions currently import approximately 65% of their crude oil. Western Europe has reduced the gap between domestic crude oil production and consumption of refined products during the past decade, but still imports approximately 55% of its crude oil. The high dependence upon imported oil in North America and Asia/Far East, coupled with increasing environmental concerns, may generate fundamental changes in these key consuming markets and the associated global energy markets: Consuming energy markets may seek to diversify imported energy sources as OPECs share of the remaining oil reserve base increases. Consuming energy markets may increase dependence upon domestic and imported natural gas as an energy source. Governments may increase pressure on utilities, engine manufacturers, and refiners to improve fuel efficiencies and reduce emissions. Consuming energy markets may begin substituting refined product imports for crude oil imports, if refinery capacity is limited by environmental legislation within expanding markets. Gas-to-Liquids (GTL) and Liquefied Natural Gas (LNG) technologies are well positioned to benefit from these potential market changes. GTL provides premium, environmentally friendly fuels for transportation markets and LNG provides clean-burning fuels for utility and major industrial markets. Both GTL and LNG products compete against conventional refined products, but each targets different fuel markets. While GTL and LNG may compete for gas resources, both technologies have similar fiscal and regulatory drivers in the market and at site locations, which is likely to foster a synergistic working relationship between these two technologies.

Transformation of global energy markets: The future roles of GTL and LNG
M.H. Koelmel, Sasol Chevron Consulting Ltd., United Kingdom

Introduction
I never think of the future, it comes soon enough. Albert Einstein Einsteins convenient approach to the future is a luxury denied to Governments and energy companies. Economic development is occurring on a global scale and with it there is increasing demand for energy. This coupled with ever more complex international relationships and interdependence means that governments must understand the probable trends and drivers of future energy use and act on the implications. During the past decade, the gap between domestic crude oil production and the consumption of refined products has increased significantly in key North American and Asian/Far East markets, increasing these markets dependence on crude oil. This trend is expected to continue for at least the next decade. The North America and Asia/Far East regions currently import approximately 65% of their crude oil. Western Europe has reduced the gap between domestic crude oil production and the consumption of refined products during the past decade but still imports approximately 55% of its crude oil. The governments of these regions face a major energy management challenge as the markets transform and the future fuel mix develops. Similarly, energy companies, national and independent, will be charged with putting solutions in place to meet the energy challenges of the future. Since the energy business is characterised by large scale, long-term investment, there is an imperative to understand potential future fuel solutions as early as possible for, as already noted, the future comes soon enough. The development of Gas-To-Liquid (GTL) provides one piece of a more complex solution. LNG provides another. GTL fits the likely drivers for future fuels and has the potential to account for 10% of the global diesel fuel market within the next fifteen years. Whilst GTL is a marginally commercial proposition today , the GTL industry can anticipate (as the oil industry experienced) major changes in efficiency through economies of scale, reduced costs from technology improvements in all areas of the process and process efficiency gains from debottlenecking. Any discussion of the transformation of energy markets and the future role of GTL and LNG is inherently predictive and speculative. However, it is possible to scrutinise the past for indicators of how the future might look. The drivers for change will be similar, however, the circumstances in which they operate are likely to vary. This paper will look at the past for lessons and likely drivers of future fuel policy, assess where the industry is now and, finally, suggest what the future might look like and the role that GTL and LNG will play in that future. Identifying future trends is not a science. At best, one hopes to bracket the future with a number of probable drivers for change, but every change has unforeseen consequences. No matter how astute the planning or how perceptive the forecasts, change will always be subject to, and is often driven by, unexpected events such as war, financial crisis or, most recently, terrorist attack.

This paper does not aspire to pick winners from emerging technologies, nor forecast detailed oil and gas prices for the next twenty years. However, what can be said with confidence is that technologies, both alternative and derivative, will and are being developed, that prices for oil and gas are likely to be volatile within a given range and, finally, that there will be increasing pressure on the worlds hydrocarbon resources. Governments and energy companies need to understand what this means for them, not least because, alongside the need to take practical steps to secure energy supplies and avoid the potentially severe penalties for getting it wrong, there are also commercial opportunities, of which GTL and LNG are two.

Resource squeeze lessons from the past

The events of 1973 and the subsequent oil embargo had a profound effect on the development of the worldwide oil and gas industry and on the development of the world economy as a whole. Ill-defined concerns about a possible energy crisis had been around since the start of the 1970s. In 1973 these were thrown into sharp relief by events in the Middle East that caused prices to rise by 70% as the Organisation of Arab Petroleum Exporting Countries (OAPEC) threatened to cut deliveries by 5% per month. Further significant price increases followed in 1979 and 1980 due to the Iranian revolution and the Iran/Iraq war. The details of the crisis are well documented elsewhere, but it is sufficient to say here that the sudden disparity between supply and demand dislocated the economies of the oil-import dependent countries. This was particularly true for Europe. It also had a knockon effect for trading partners, such as the USA, who were less affected by direct imports and, in a clear demonstration of the economic interdependence in world trade, finally affected the financial performance of those who initiated the embargo. Further, the lack of warning and planning time led to the adoption of extreme measures, such as rationing, that were more appropriate for nations at war rather than advanced industrial states looking to expand their economies. The net result of this shock to the system was to constrain energy consumption, both in absolute terms and by seeking greater efficiencies through new products and product redesign. Energy efficiency became a major policy and design driver as well as becoming a major motivator for the consumer as energy prices rose. The improvement in miles per gallon figures for personal vehicles following the oil crisis (13.2 mpg in 1970 to 19.7 mpg in 1990 in the United States3) demonstrates this point. The 1973 energy squeeze arose from constrained supply. This pushed countries towards domestic energy solutions wherever possible, reducing the dependence on imports and improving their security of supply. Examples of this are the French nuclear energy programme and the development of the United Kingdom Continental Shelf (UKCS). This last example is particularly telling as it is set against a backdrop of UKCS production costs at the time of $1.50 per barrel compared with $0.15 in the Middle East4. It clearly demonstrates that energy development costs, a whole order of magnitude greater than the cheapest option, are acceptable if the driver, in this case security of supply, is strong enough. This has implications for GTL since establishing initial, greenfield facilities will incur some additional costs, though not on the same scale. In passing, it is also worth noting that this investment generated an industry that was ultimately self-sustaining and delivered additional benefits in terms of technology, investment and employment. These strategies combined to steady the world economy, so much so that there was the confidence to accommodate additional drivers around the environmental concerns which had developed during the 1970s and were well established by the early to mid 1980s. These concerns, if not actually displacing energy efficiency as the primary driver, at least matched it and, in many cases, energy efficiency and environmental best practice shared much common ground. The problems had, for the most part been solved, or at least managed, but a lack of planning and preparedness meant that the brakes had been applied in a way that was immediate, extreme and painful. Inflationary effects were still resonating years later. The world paid a high price for making cosy assumptions about supply.

The Present
The energy squeezes of 1973-1980 were sudden, politically driven events. There is no suggestion that this is about to be repeated, though the events of 11th September have resurrected questions about security of supply and brought them to the fore. What is possible however is an energy squeeze, probably regional but possibly global, brought about by a supply/demand imbalance exacerbated by environmental drivers, such as was recently experienced by California gasoline prices. With this in mind, it is worth revisiting the consumption figures given earlier in greater detail. Petroleum fuels account for 55%-60% of the worlds energy consumption split approximately 73% and 27% between oil and gas sources1 respectively. The split between oil and gas has remained relatively constant over the past 20 years, although there has been a modest 2%-4% increase in gas derived fuels relative to oil derived fuels1. Transportation fuels are predominantly derived from oil, accounting for 55%-60% of total oil derived products1. By contrast, transportation fuels account for only 5%-6% of total gas derived products. The world clearly prefers liquid fuels for transportation due to the relatively high energy content per litre and the ease of handling. Because transportation engines and distribution systems are designed for liquid fuels, this preference is unlikely to change rapidly in the near future. Natural gas is primarily utilized by industry, electric power generation, and fixed systems attached to pipeline distribution systems.

25 Petroleum Products (MMBPD) Petroleum Products Real Crude Price

100 Real US Crude Price ($/BBL)

20

80

15

1949 - 1978 Y=4.12X-0.34 2 R = 0.9900

1983 - 2000 Y=1.05X+10.01 2 R = 0.9625

60

10

40

20

0 0 2 4 6 8 10 Real GDP (US$ Trillions)

Figure 1 - Real United States gross domestic product (GDP) in chained 1996 dollars versus United States petroleum products consumed from 1949 to 2000. Source: U.S. Department of Commerce and the U.S. Department of Energy. The consumption of petroleum fuels and products generally varies as a function of economic activity, as evidenced by the past 50 years of data from the United States (Figure 1). The 1 United States consumes approximately 23% of the worlds energy supply . There are two remarkable observations in Figure 1. First, there is an excellent correlation between petroleum products consumed and real GDP growth during the periods 1949-1978 and 1983-2000. Second, the United States economy reduced its consumption of petroleum products by almost 20% during the period 1978-1983 in response to high crude prices, and did not return to 1978 consumption levels until 1998 with an economy nearly twice the size it

had been in 1978. Whilst it is true that some of this growth can be accounted for by the massive increase in the service sector, as opposed to the more energy intensive manufacturing sector, the second observation is important when considering options available to energy importing economies.

Energy Importing Economies

North America and the Asia/Far East regions of the world have become increasingly dependent upon imported crude oil to meet demand for petroleum products, as indicated in Figure 2. Between 1990 and 1999 North America increased its percentage of imported oil to meet refined products demand from 47% to 64%2. Similarly, the Asia/Far East region increased its imported oil from 53% to 64%2. These trends will likely continue throughout the next decade, unless governments in these regions implement energy policies that foster energy conservation and diversification into other fuel sources.

25 Millions of Barrels per Day 20 15 10 5 0 1990

25 Millions of Barrels per Day

Refined Product Consumption Crude Oil Production

20 15 10 5 0 1990

Refined Product Consumption Crude Oil Production

North America
1991 1992 1993 1994 1995 1996 1997 1998 1999 Year

Western Europe
1991 1992 1993 1994 1995 1996 1997 1998 1999 Year

25 Millions of Barrels per Day 20 15 10 5 0 1990

Refined Product Consumption Crude Oil Production

Asia & Far East

1991 1992 1993 1994 1995 1996 1997 1998 1999 Year

Figure 2 Crude oil production versus consumption of refined products for three energy importing regions of the world. Source: OPEC Annual Statistical Bulletin, 1999. In contrast, Western Europe decreased its percentage of imported oil from 65% to 55% during the same time period. Within North America, the events of September 11, 2001 have heightened the desire of Governments to diversify imported and domestic sources of energy. Greater exploitation of natural gas could offer North America domestic options as well as the opportunity to import LNG from countries that currently do not supply crude oil to the region. Increased use of natural gas in the form of LNG is an option currently being considered by many Asian and Far East countries. Japan and Europe already import significant volumes of LNG. Europe also has considerable diversity of supply in pipeline gas and natural gas is viewed as an environmentally friendly fuel by most governments. The pressure for diversity of energy supply and environmental factors may position energy-importing economies to accelerate the use of natural gas in the future, although this future trend would be a deviation from the 2%-4% market share growth for gas relative to oil during the past 20 years1. Returning again to the second observation from Figure 1, that the United States economy reduced its consumption of petroleum products by almost 20% during the period 1978-1983 in

response to high crude prices, North America may begin to reconsider the merits of enforced conservation. Transportation efficiency could now become a focus, since the North American economies are dominated by petrol (or gasoline) fuels and thus spark ignition engines, which are not as efficient as diesel engines. North America flirted with the introduction of diesel engines into the automotive fleet during the 1980s, in response to high oil prices during the 1979-1985 period. However, these engines did not meet consumer expectations. In contrast, the latest generations of high performance diesel engines currently being produced in Europe are successful and accepted by automotive consumers for both performance and fuel efficiency. High performance diesel engines should also be well suited for the next generation of hybrid electric vehicles. Considering that transportation fuels comprise 55%60% of oil derived products1, it may become increasingly difficult for North America to ignore the attributes of the new generation of European diesel engines, and the associated opportunity to further reduce energy consumption as a function of GDP. Environmental pressures and economic factors within some energy importing regions may preclude construction of new refineries and limit the expansion of existing refineries. In addition, existing refineries may face difficult challenges in upgrading older facilities to meet new fuel specifications. If these environmental pressures are coupled with a shift toward middle distillate fuels, such as diesel, energy importing countries could begin importing selected refined products to extend or augment the capacities of their established refinery systems. Figure 3 indicates that excess refining capacity has decreased over the past 20 years in the United States.

100%

90% Percent

80%

70% USA Refinery Percentage of Total Petroleum Products USA Refinery Nameplate Capacity Utilization

60% 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 Year
Figure 3 USA refinery utilization has improved significantly during the past 20 years, thereby reducing the excess refinery capacity available for response to temporary fuel shortages. Since 1970, refinery capacity has increased proportional to increasing USA consumption, refining 77%-81% of total petroleum product consumption. Source: U.S. Department of Energy. The high dependence upon imported oil in North America and Asia/Far East, coupled with increasing environmental concerns, may generate fundamental changes in these key consuming markets and the associated global energy markets. For example, consuming energy markets may seek to diversify imported energy sources as OPECs share of the remaining oil reserve base increases. They may increase dependence upon domestic and imported natural gas as an energy source. Governments may increase pressure on utilities, engine manufacturers, and refiners to improve fuel efficiencies and reduce emissions. Finally,

consuming energy markets may begin substituting refined product imports for crude oil imports, if refinery capacity is limited by environmental legislation within expanding markets. In contrast with 1973 and the immediate aftermath, today the ability to meet demand using indigenous resources, is much reduced; US domestic supply is diminishing and the UKCS is at a mature stage of development. Increased energy efficiency is back on top of the agenda. Policy choices focus on: Reducing consumption, which carries a significant economic risk, Developing a domestic alternative energy programme which, whilst being the favoured option from an environmental perspective, has major risk factors around the technologies and their ability to meet energy needs on the desired scale, Increasing imports, with its concomitant security of supply issues. It is almost inevitable that national responses will be a combination of all three policies, with the balance between each component varying according to individual circumstances. It is in this context that the future of fuels such as GTL and LNG should be considered. In Europe, the process to make these policy choices has already begun. Having recognised the potential of the problem, the European Union (EU) is taking positive steps to address it by such means as reducing reliance on traditional sources of transport fuel supply to 80% of the current total and making up the remaining deficit from alternative sources. Similarly, it has been noted that transport needs represent a significant part of the energy market and have a major impact on environmental issues. In Europe, a growing movement towards compression ignition vehicles, which bring with them significant energy efficiency and emissions gains over spark ignition vehicles, has been marked. This trend has yet to be mirrored in the United States, not least because of the poor reputation of diesel fuel and technology in terms of perceived performance, noise and cold-weather reliability. Nonetheless, the European experience demonstrates what compression ignition can deliver in terms of energy efficiency and emissions reduction and is likely to become a fuel of choice in countries where these are key drivers. The question then becomes one of how to overcome customer resistance by improving the reputation of compression ignition fuel. This is a major clue as to the likely future role of GTL. Therefore, any review of the current energy mix needs to consider the role of natural gas. In the past 20 years, Europe has reduced its dependence on oil with the so-called Dash for Gas. Gas displaced oil and coal and delivered significant environmental benefits; the United Kingdom for example achieved over half of its Kyoto target simply by making the switch. Certainly the UK restricted the construction of gas-fed power stations at the end of the 1990s. However, the stricter consents policy was politically driven with that countrys coal constituency in mind and, in the face of an unanswerable environmental case, proved unsustainable. In any assessment of the future fit of GTL and LNG it should be kept in mind that, as a rule, where there is a secure supply and when environmental considerations matter, Governments, and consumers, will favour natural gas.

The Future
Looking at the past and where we are currently, it is reasonable to make certain assumptions about likely future energy use and the implications for the future fuel mix. Governments will obviously look for energy policies that do not stall or adversely affect economic growth. Those countries with hydrocarbon resources will look to maximise their production potential and this will probably lead to increased government involvement in the depletion process. This has already begun in mature production areas such as the UKCS where government and industry have worked together for the past three years. Here, a regulatory and fiscal environment has been developed where exploration and production can be maximised and existing infrastructure can be utilised to develop smaller fields that would otherwise be neglected.

By reducing their fiscal take, governments have the power to significantly improve the economics of any project or, indeed, to make them worse. The United Kingdom has started to use fiscal incentives to encourage in-fill development in what is traditionally a high cost, low tax province. In high tax provinces, a governments scope for improving the economics of any given project is that much greater. This process is likely to be replicated in one form or another by hydrocarbon provinces progressing through the mature phase as they seek to maximise inward investment and overall production. This suggests that current depletion predictions are on the pessimistic side, which will allow governments more time to plan and implement energy solutions but, more importantly, it means that the future of energy cannot be understood purely in terms of market forces. Whether they are called premiums, incentives or subsidies, the economics of projects in the future will depend on more than simply the costs of exploration, production and getting the product to market. Energy products of the future can reasonably expect fiscal advantage if they deliver real results for political and cultural agendas. For those with insufficient or no indigenous energy supply some level of energy imports is inevitable. In the light of past experience, countries faced with this choice will be looking to develop a sound import strategy to secure an adequate energy supply that can be relied upon. The ability to source supply from a range of geographical regions will be a major factor in the future success of energy products. With balance of payments and environmental concerns on the agenda, countries will look to optimise energy use and, for those countries that can afford it, the primary strategy for doing this will be to use the most efficient fuels in the most efficient manner. As already discussed, that provides a future role for natural gas and for two significant products of the natural gas pantheon; LNG and GTL.

Future Roles of GTL and LNG

It is true, and likely to remain so, that access via a pipeline is the cheapest and most efficient route to market for natural gas. Therefore both LNG and GTL are development solutions that will be adopted only in the case of so-called stranded gas where a pipeline solution would be too expensive to apply. Potentially this means that the two technologies are in competition for resources although, in practice, many possible sites have natural gas reserves that are substantial enough to support both forms of development. GTL and LNG thus have synergistic potential. Both have similar requirements for site locations, though unlike GTL, LNG requires deepwater shipping access, and both must compete with established industries in mature markets. Due to the fact that GTL fuel is primarily suited to the transportation fuels market and LNG is primarily suited for utility and major industrial markets, GTL and LNG products are generally not in market competition with each other. The synergies are such that there is a temptation to attempt integrated development, but this is likely to be a difficult option in the short term. Unlike LNG, GTL is not dependent on longterm contracts though this dependency might be reduced for LNG as spot markets develop. For producer countries, an unencumbered GTL project is a faster route to market. The synergies of GTL and LNG can best be realised through a policy of separate, but together development. With respect to fuel properties, GTL fuels are exceptional and will compete well with conventionally refined products, providing that GTL fuels are sold at parity with conventional fuels. GTL diesel fuels exceed all World-Wide Fuel Charter category 4 standards, except density (Figure 4) and exceeds virtually all future diesel specifications currently envisioned.

Aromatics (%) 35 2005 20 2007 Current Europe

Current USA

GTL Fuel 10
<1 <5 50 World-Wide Fuel Charter 350 500 1000+ Sulphur (ppm)

Cetane: 70 Cetane:

Figure 4 GTL diesel fuel specifications relative to existing World-Wide Fuel Charter specifications If governments increase pressure on utilities, engine manufacturers, and refiners to improve fuel efficiencies and reduce emissions, GTL fuels should be well positioned to take advantage of the change, particularly if the diesel engines become a preferred solution. In addition, GTL naphtha fuels are well suited for on-board reforming units, currently being considered for the next generation of automotive fuel cell systems. Energy importing economies, which rely heavily on petrol (gasoline) as a transportation fuel, could significantly improve transportation energy efficiency by fostering a shift to high performance diesel engines, and subsequently diesel hybrids. Introducing zero sulphur fuels would enable the next generation of exhaust after-treatment systems that would virtually eliminate tailpipe emissions. The high performance diesel engines currently being sold in Europe require higher cetane levels to improve start-up and reduce engine noise. Consequently, European fuel specifications already require higher cetane levels than North American fuel specifications
S u lp h u r < 1 p p m A ro m a tic s < 1 % C e ta n e > 7 0

CI
T ra n s p o rta tio n F u e l E c o n o m y, C O 2 E ffic ie n c y

D ie s e l

G TL Fuel

SI

P e tro l
C o n v e n tio n a l

LPG LNG CNG

A lte rn a tiv e

U r b a n A ir Q u a lity B e n e fits Figure 5 Relationship between fuel economy and urban air benefits. Compression Ignition (CI) or diesel engines are significantly more efficient than Spark Ignition (SI) or petrol engines. The combination of efficient engines and clean fuels allows economies to reduce fuel consumption, reduce greenhouse emissions, and improve air quality.

Figure 5 is a conceptual model that indicates how governments can achieve better fuel economy and virtually zero emissions by converting petrol fleets to diesel technologies and fostering the introduction of zero sulphur, high cetane fuels. Conventional refineries can compete effectively with new diesel fuels, although some capital investments would be required to meet new fuel specifications. Since GTL Fuels are derived from natural gas, these fuels can offer diversity of supply to consuming energy markets. GTL Fuels can also augment shortages in regional refining capacity with high quality neat fuels or as blend-stocks for refined fuels that are marginally off specifications. Both of these characteristics could provide options and flexibility for energy consuming markets, if a global GTL industry develops over the next decade. For producing countries, both LNG and GTL offer the opportunity to monetize hydrocarbon reserves that might otherwise be left in the ground. In Nigeria, LNG and GTL technologies are and will generate revenues from natural gas that historically has been flared off as a waste product. Even before it gets to market and becomes part of the energy solution in the user country, GTL can deliver significant returns, both environmentally and in terms of generating investment and employment for the producer country. Further, GTL allows producing countries the opportunity to produce finished product and therefore have to export less of the value chain. GTL and LNG products between them cover both the transport market and the industrial energy markets. Both markets are key areas for any government looking to reduce emissions and both markets carry severe political risks for governments looking to apply control mechanisms, particularly if those mechanisms mean price increases. Indeed it is questionable whether sufficient political will can be summoned and maintained to drive significant changes though by such means. The failure of the Energy Products Directive in Europe and the demise of the Fuel Escalator in the UK suggests not. Increasing performance rather than penalties is an altogether better political option and whilst LNG delivers the benefits of gas powered energy generation as already discussed, GTL delivers emissions reduction based on improving the performance of the fuel rather than reducing the use of vehicles. Both LNG and GTL can deliver on a governments environmental drivers and deliver a more compelling option. In terms of security of supply and the regional distribution of potential GTL and LNG projects, a range of opportunities are being explored from the Caribbean to the Middle East and Australia. Projects are underway in Nigeria, Qatar, Alaska and Malaysia, and Australia is likely to be added to that list. These range from demonstration plants to fully-fledged production facilities. All the Supermajors are involved to some extent. These give GTL a significant resource base and access to some formidable project management skills. Additionally, the involvement of a number of different companies and countries in the development and manufacture of GTL will strengthen that products argument around security of supply both in terms of origin and quantity. As LNG took time to get established, so GTL will not happen overnight. GTL provides a number of answers to the questions concerning efficiency, security of supply, environmental performance and customer acceptance. Further, unlike other new and alternative energy sources, GTL is a proven technology that can deliver measurable results. (Although, it is still expensive.) In terms of the likely drivers for fuel in the future, GTL is an excellent option, both from a user country perspective and a producer country perspective. It is true that, as with the adoption of any new process or technology, there will have to be an element of fiscal or legislative incentives to allow the new product to compete successfully with established products. However, as has already been demonstrated, this is in line with current and likely future government thinking and, as GTL develops, it will benefit from increasing economies of scale. Ultimately, GTL can and will be able to stand on its own and it is important that it does so, making financial as well as environmental sense. Certainly companies currently considering whether to get involved in GTL and to what extent would do well to bear these underlying factors in mind rather than apply base case metrics across the board. Offshore development,

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when it first started, made little or no economic sense in the short term and yet offshore developments now compete successfully on base case metrics and are the future of oil and gas exploration.

Conclusion
The benefits and opportunities of natural gas derived energy products are real, demonstrable and will play an ever-larger part in solving the worlds energy problems. However, project economics mean that LNG and GTL will never replace traditional fuels entirely. Oil is dominant and will remain dominant for the foreseeable future and while the likeliest future scenario is of increased demand chasing fewer reserves, the mature oil provinces, such as the Gulf of Mexico and the North Sea have shown remarkable endurance. That means there is time and it should be used wisely. We have the understanding, the experience and the technology to implement planned and sustainable energy solutions that will allow economic growth to continue in an environmentally acceptable way. The alternative is to initiate a painful knee-jerk response at the last minute, which would represent a failure of policy. Furthermore, whatever the availability of oil-based products, there are, and will continue to be, environmental imperatives, particularly in the polluted urban environments of the developed world, that natural gas-based products are better able to meet. There is a clearly defined role and market for both LNG and GTL in existence today. For producing countries too, LNG and GTL offer an opportunity to earn revenue from natural gas reserves that would, either be flared off uselessly and with a cost to the environment, or else left in the ground. GTL and LNG offer producing countries new scope for investment, development, employment and trade. Producer countries have been reaping the harvest of LNG for some years and are now looking to develop their GTL capability with the same rewards in mind. For importing countries, the energy supply solution of the future, whatever shape it takes, must be secure. No nation with the choice to do otherwise will be dependent on a single region or source for its energy needs. The diversity of possible LNG and GTL production locations means that the required geographical spread is achievable and the number of major energy companies currently involved in both technologies means that countries are unlikely to be dependent on just one or two suppliers. LNG and GTL can answer the question of security of supply, furthermore, security of supply is an issue that commands a premium. Finally, as an industry, the oil and gas industry has always looked to technology and innovation to improve its importance and has rarely been disappointed. In the course of the environmental debate, the industry has looked to innovation, technology and the development of best practice to keep its promises. LNG and GTL are the practical manifestation of this trend. LNG has been around the block and is an established player in the market. With its proven benefits and the promise of more to come, it is now time for GTL to step up to the plate.

References
1 2 3 4 International Energy Agency, Key World Energy Statistics 2001 OPEC Annual Statistics Bulletin, 1999 International Energy Studies, Energy Analysis Program, Lawrence Berkeley Laboratory, Berkeley, CA, 1995. Harvie, C., Fools Gold The Story of North Sea Oil, Hamish Hamilton 1994, p102

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