Wednesday, July 22, 2009

Natural Gas Geopolitics

This week's feature story at Pop City highlights the need for Pittsburgh to rethink its global position. Kate Lauer argues that Pittsburgh must get out in front of the workforce needs for regional energy businesses. I agree. I would add that the local media needs to help its readers understand the global dynamics of trade and the geopolitical considerations.

Most Americans don't understand that even full energy independence won't appreciably change US foreign policy. The European natural gas market will impact job creation in the Marcellus Shale area. Global, not domestic, supply and demand will drive opportunity in Southwestern Pennsylvania.

The gas equivalent of a barrel of crude now sells for around $20. The industry is seeing its first glut, not least because so much extra capacity has been built. Mr Suwaidi is a victim of his own success. He turned a seller’s market into a buyer’s market. Fortunately most [liquid natural gas or,LNG] is bought on longish fixed-price contracts, otherwise things would be much more serious for him. ...

... Even so, long-term demand for gas has never looked better. China and India look set to continue growing fast, as will their energy needs. Besides being cheaper than oil, gas emits less carbon dioxide when burned, so its attraction has grown along with rising concern about climate change. Some producers, like Canada, Norway and Britain, are running out of reserves. Meanwhile Russia’s aggressive energy policies have made its European customers wary. Qatar, by contrast, underlined its dependability by inviting America’s armed forces to build a large base there. Despite the current price slump, Mr Suwaidi’s faith in a global LNG market seems likely to be rewarded.
How much news about Qatar do you read in the Pittsburgh Post-Gazette on a weekly basis? It is greater demand for natural gas that will trigger the boom around Pittsburgh, which is looking more like an economically diversified Calgary with each passing day.

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