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Gas Projects are Inert to Crisis

In this period of social and economic confusion, Gas projects seem to benefit from an exceptional stability.

Indeed, many Oil projects have been impacted by the Covid pandemic. With Oil projects being advanced, postponed, or renegotiated, Gas projects have on the other side not been questioned

A Covid-proof Stability

At the crisis outbreak, operators worldwide took decisions to anticipate the market fluctuations and the beginning of the price war.

Among these operators, the US Independent producers of shale oil and gas were on the front line, having to adapt to the situation.
If the oil business suffered, the gas remained steady.

USA Oil versus Gas rig count - Source : BakerHughes
USA Oil versus Gas rig count – Source : BakerHughes

Illustrated by the curve above, it clearly shows the immediate impact of the Covid on the shale Oil. The number of oil rigs fell from its plateau by 70% since early March. 

At the opposite, the rigs number for shale Gas stayed on its trajectory, inert to pandemic effects.

Reasons of Gas Stability

In fact, reasons of Gas Projects stability are numerous :

  • Low granularity of Gas Market
    As only few locations can produce gas in large quantities, the gas market is traded by framework contracts between large producers and countries. Meaning long-term / large quantities agreements rule the gas market, offering high stability to producers and customers.
  • Robust applications
    Due to lock-down policies, the oil market suffered from a shrinking demand for fuel used by airplanes, cars, trucks and heavy industries. Unlike the demand for gas which stood resilient. Thanks to the robustness of applications such as power generation, domestic use and production of ethylene. Gas is barely used in transportation activities.
  • Gas is a value vector
    Since 2013, the natural gas costs from $2 to $3 million British Thermal Units (BTU) (around 28 m3) on the open market. By itself, this price is not enough to justify large scale investments for projects. Yet LNG projects happen all around the globe because of the value expected from this gas once transformed in plastic or electricity.
    Gas is worth its investment.

Gas Projects Investments still to Grow

In the same way we do for all the Petroleum industry, we used our project database www.projectsmartexplorer.com to crunch numbers for Gas projects.

Upstream investments already awarded for Gas projects year per year
Upstream investments already awarded for Gas projects year per year

Not only the level of investment for gas projects is comparable in 2020 to 2019, but the remaining two months of the year bring more to come.

In addition, the volume of EPC contracts already awarded for 2021 is unprecedently high, enhancing the sustainability of the gas market.

Of course, you can count on Project Smart Explorer
to guide you on gas projects and take advantage from a steady market:
www.projectsmartexplorer.com

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2 Comments to “Gas Projects are Inert to Crisis”

  1. Chers Amis
    Bel article une fois de plus.
    J’ai fait toute ma vie technique dans le gaz et LNG, j’aime bien ce secteur.
    Le gaz dans le futur…East Méditerranée, la Turquie, la Saudi et son gaz de schiste, l’Algérie qui patine toujours…et les US qui cherchent à exporter leur surplus de LNG. Et SNOVIT qui est arrêté pour plus d’un an…il y a donc des nouvelles dans ce métier…

    Je vous remets un extrait et un lien dans mes prochaines NEWS de fin Novembre ?
    Bon courage à tous
    Jean Jacques ROYANT

    • Bonjour Jean-Jacques,

      Merci encore une fois pour ton analyse.
      Pas de problème pour pour partager le post dans ta newsletter, tout le plaisir est pour nous.

      Bon confinement
      Jean Guilhem

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