Natural Gas Could Displace 3 Million bpd of Bunkers

Citi Group's Edward Morse says oil exporters stand to lose as energy dynamics shift

Inexpensive natural gas could drop global oil demand by almost a quarter, including removing 3 million barrels per day (bpd) of demand for marine fuel, according to Edward Morse, global head of commodity research for Citi Group, Platts reports.

Speaking at the Middle East Petroleum & Gas Conference in Abu Dhabi, Morse said a total of 20 million bpd of world oil demand could be replaced by natural gas-based fuels, with a majority of the change - 12 million bpd - coming from the transport sector.

Morse said global oil prices may be at a peak for the medium term, and oil producing countries are likely to be hurt by the developing trends.

"We are moving into an environment where $90/b Brent will become more of a ceiling for the market," he said.

"But it's hard to pick where the bottom will be."

U.S. shale oil production has already dropped that country's imports of light sweet crude oils, and Canadian exports are poised to increase, further reducing North America's dependence on shipments from other parts of the world.

Morse said oil importers could experience a 3 percent gain in GDP due to cheaper energy.

Another factor in falling prices is pressure for production growth from oil-producing nations including Venezuela and Iraq at the same time that demand moderates, he said.

"A decade of demand growth is coming to a tipping point," Morse said.

The natural gas director for Det Norske Veritas (DNV) recently wrote that liquefied natural gas (LNG) is likely to completely displace oil-based bunkers by 2040, although a Boston Consulting Group (BCG) analysis suggests no more than 600,000 tonnes of marine distillate will be replaced by LNG by 2020.