Natural Gas

Question 1

What are the 3 main stages of the gas and oil industry?

Answer 1

1. Upstream (E&P)
2. Midstream (Pipelines and shipping)
3. Downstream (Refining and marketing)

Question 2

What is gas displacing coal in?

Answer 2

Electricity generation

Question 3

Name 4 features of natural gas

Answer 3

1. Pipelines require long term commitment
2. Hard and costly to transport
3. Abundant and diversified
4. Environmentally friendly relative to fossil fuels

Question 4

Classifications of gas

Answer 4

1 Wet/dry

2. Associated/non associated
3. Sweet/sour

Question 5

Natural gas is the fastest growing fossil fuel, where is most of the growth observed?

Answer 5

LNG

Question 6

Which sectors demand the most nat gas?

Answer 6

Industry and electricity

Question 7

Which is nat gases biggest competitor and why

Answer 7

Coal, it is cheaper without environmental standards

Question 8

What are the advantages and disadvantages of gas pipelines?

Answer 8

Ad - economies of scale
Disad - 1. Trade off between pipeline size and line pressure drop
2. Long gestation period

Question 9

What are some advantages of LNG?

Answer 9

1. Flexibility (not having to commit to long term contracts)
2. Long distance (much faster)
3. Affordability - ideal for smaller newer markets
4. Displaces oil
5. Security of supply
6. Reduced volume when cooled

Question 10

What are the three stages of delivering LNG

Answer 10

1. Liquefaction
2. Transportation
3. Storage and regasification

Question 11

What do storage tanks and liquefaction benefit from

Answer 11

economies of scale

Question 12

What factors have put downward pressure on gas demand in Europe?

Answer 12

• Coal fired power stations

- Weak overall economic activity

Question 13

Why have Japan and Korea contracted LNG demand

Answer 13

1. Nuclear increase

2. Weak economic growth

Question 14

Name the 3 pricing systems for gas

Answer 14

1. Asia pacific (JCC) - Crude correlated
2. UK/Europe (NBP) - gas on gas market
3. N America (HH) - gas supply and demand

Question 15

What is gas in terms of supply elasticity?

Answer 15

Short term price inelastic

Question 16

Describe the movements of the LNG market

Answer 16

Moving from long term contracts linked to oil to a liquid spot market on the back of a supply overhang

Question 17

What is a driving force of demand for gas?

Answer 17

Coal and how dirty it is

Question 18

What is the result of improved technology for gas?

Answer 18

It has made it a lot more available and flexible

Liquefaction and regasification can be done from vessels!

Question 19

Advantages of LNG

Answer 19

1, Flexibility

2. Liquidity
3. Inter connectivity
4. Risk allocation
5. Transparency
6. Liberalization
7. Aggregation
8. Competition