Shell CEO Says LNG Costs Need to Fall to Make Gas Competitive

   By Robb M. Stewart 
 

PERTH, Australia-Natural gas companies need to drive down capital costs to ensure the fuel can better compete against rival sources of power such as coal and renewable energy, Royal Dutch Shell PLC Chief Executive Ben van Beurden said Tuesday.

In a speech opening an industry conference on liquefied natural gas in west Australia, Mr. van Beurden said demand for natural gas is expected to continue growing in the years ahead, and projects with the lowest production costs will have a competitive advantage.

To ensure that demand is met, the energy industry will need to keep investing to ensure that there is sufficient supply, especially in the developing world, he said.

At the same time, new markets are opening up in areas such as Thailand, Pakistan and Poland, that were previously considered to be too small to target. Technologies such as floating plants that can turn liquefied natural gas back into usable gas, among other things have helped lower access costs for importers, making LNG a viable energy source, he said.

The International Energy Agency estimated global demand for natural gas will grow 2% on average between 2014 and 2020, and demand for LNG is expected to grow twice as fast, Mr. van Beurden said.

The industry needs to continue to innovate to drive down capital costs for LNG, from upstream development to liquefaction, shipping and regasification, he said. He added the most important areas to focus on are design, engineering and construction.

"LNG plants have become more expensive because we take more time to engineer them, because we face lower productivity when we build them, and because we're often working in more complex locations" Mr. van Beurden said. "We need to reverse this trend."

-Write to Robb M. Stewart at [e-mail]

(END) Dow Jones Newswires

April 11, 2016 22:43 ET (02:43 GMT)

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