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Industry Underscores Need for Change at Gastech 2015

Posted on Nov 05, 2015 by ABS Marketing & Communications

Much has changed in the year since the last Gastech conference, but this year’s show in Singapore got off to a fast start with a series of bold keynote papers that stressed a positive long term view for the natural gas business.

The decline in oil prices and the knock-on effect on natural gas, slower economic growth and lower vessel charter rates have created shocks along the LNG supply chain. But as conference co-chairman Paul Sullivan, SVP Global LNG/FLNG at Worley Parsons pointed out, despite an environment of delays and lower investment, the situation is not new.

“The challenge is not to lose confidence, it is time to raise our game and approach more radical partnering between investors and contractors,” he said.

The mood was reinforced by Teo Eng Chong, CEO of International Enterprise Singapore who noted an increase in liquidity of LNG trading and work towards the emergence of an Asian LNG price. LNG demand is increasing from non-traditional markets and Singapore is making progress on development of LNG bunkering, he said.

For Helge Lund, CEO, BG Group, the dominant themes are uncertainty and change. However, these create an opportunity to look at the business anew. The pre-crash business model of high costs and low return on capital invested is not sustainable, he argued.

Because the boom in LNG exploration took place at a time of high oil prices, not enough attention was paid to cost management with the result that the bust was all the harder to manage.

“This prompts us to be honest and confront our business model,” he said. “We cannot assume $100 oil and attracting capital will need a more competitive return. We can do this by focusing on discipline, innovation and people.”

The gas industry, he said, must be able to deliver returns regardless of the oil price, with low cost production across the supply chain. Innovation has two dimensions; the use of technology and greater collaboration to build trust between partners. A more sustainable long term business model would also help attract young people to join the industry, he said.

“LNG is not a twilight industry, we have the answers to our challenges. We also realize business as usual is not an option. We must confront the facts and use them to drive change.”