Anglo-Dutch oil supermajor Royal Dutch Shell plc (NYSE: RDS-A) said today that it plans to invest more than $20 billion by 2015 in the company’s Integrated Gas business. The company claims to produce 22 million metric tons annually of liquefied natural gas (LNG) and says it is adding capacity for another 7 million metric tons of annual production in Australia. Shell also claims the company is “maturing” further LNG options totaling another 20 million metric tons annually. One million metric tons of LNG is equivalent to about 8.7 million barrels of oil.
Shell’s CEO said:
Strong growth in gas markets, especially Integrated Gas, is a major opportunity for Shell and our shareholders. Our Integrated Gas earnings have more than trebled in the last five years, reaching $9 billion over the last year, driven by liquefied natural gas (“LNG”) and gas-to-liquids (“GTL”), and we see growth opportunities to invest over $20 billion here for 2012-15.
This could just be one of those times when Shell has a hammer and everything looks like a nail. But probably not. Demand for natural gas as LNG will grow, though as we noted earlier this week, costs of building the liquefaction plants are rising quickly. Shell estimates that global primary energy demand will grow to the equivalent of 400 million barrels of oil a day by mid-century. Shell expects demand for natural gas to equal 25% of that total, with a good portion of the growth coming in LNG.
The $20 billion investment Shell says it will make in LNG production over the next few years is, to some extent, the tip of the spending that the company will have do if it wants to increase LNG production. Shell reckons that the required global investment by the oil & gas industry could surpass $700 billion to meet mid-century demand. And remember, that’s just for the LNG portion of those 400 million daily equivalent barrels. These are really big numbers, and they are probably conservative.