Given the abundance, environmental acceptability and affordability of gas, Shell believes that it will become an ever-increasing part of the global energy mix over the next two decades. This is good for the planet, good for the economy, and good for the gas business. In this keynote speech at the LNG17 conference, Andy Brown outlines what the industry and policymakers must do to ensure gas can become the leading source of global energy.

Gas at the heart of a sustainable energy future

It is fitting that the largest liquefied natural gas (LNG) conference ever is hosted in the United States – a country that recently became the largest gas producer in the world.

I believe the LNG industry has never been in better shape: it is an industry that is as robust and as dynamic as ever.

I also believe that we are seeing unparalleled innovation in our industry creating new sources of supply ... and demand for LNG.

Robust LNG business

Let me start with why I believe the LNG industry is robust.

Today the world has enough gas for 250 years at current consumption rates. The unconventional gas revolution has transformed our industry, doubling the volumes of economically recoverable gas. The USA alone has over 100 years’ of natural gas supplies at today’s consumption rates.

Given the abundance, environmental acceptability and affordability of gas, we believe that it will become an everincreasing part of the global energy mix over the next two decades. This is good for the planet, good for the economy, and good for the gas business.

We believe gas demand will increase by some 60% from 2010 to 2030, with demand in Asia and the Middle East doubling in that period and China gas demand increasing almost five-fold.

LNG will play an increasingly important role in linking the supply centres with the demand centres as the volumes of gas supply and demand increases. We expect LNG demand to double between now and 2025 increasing from 250 mtpa to 500 mtpa.

Tight/shale gas vs. LNG

We see gas as a long-term destination fuel in the global energy mix, especially when combined with renewables. We believe that consumers will see the benefits of using gas over coal or liquid fuels in power generation, industrial, domestic and transport applications, cutting CO2 emissions and improving air quality. The recent 11% reduction of CO2 emissions here in the USA proves this point.

The diversity of supplies, from domestic sources, international pipelines and LNG will also allay concerns over energy security.

I am often asked if tight/shale gas will undermine the LNG industry. There are two potential challenges:

  • Will new domestic supply sources substitute LNG import?
  • Will oversupply from abundant incremental supply result in price erosion?

We believe that these additional tight/shale gas resources will actually reinforce the robustness of the LNG business.

Firstly, the abundance of natural gas will mean that more governments, policy makers and consumers across the world can rely on gas for their long term future, driving an increasing gas and LNG demand globally.

One example is China, where the enormous increase in gas demand is driving Chinese authorities to plan growth on all fronts in parallel: increasing domestic production, increasing pipeline and LNG imports. This diversity of gas supplies increases the robustness of supply security in China and results in a higher share of gas in the energy mix.

On the second potential challenge, undoubtedly tight/shale gas will be a great new source of gas molecules for LNG. However, we do not believe North American tight gas will create substantially lower LNG prices once delivered in the Far East.

Recently we saw Henry Hub prices nudge over $4/MMBTU... and once liquefaction and shipping costs are also accounted for, then unit costs of delivered LNG from the USA to the Far East markets will not be very much different from today’s supplies. This cost base will not allow undercutting LNG delivered from future conventional supplies from Australia or East Africa.

So, in summary, we believe tight/shale gas will complement rather than compete with LNG and even strengthen the overall proposition.

Dynamic LNG industry

A measure of the robustness and dynamism of this industry is that here in America just five years ago there were more than 100 mtpa of LNG import projects (over 40% of today’s global supply): yet now there are proposals for more than 200 mtpa LNG for export.

In Shell we believe around 60-70 mtpa of LNG could be exported from North America, and this is still optimistic given regulatory and cost hurdles. By 2025, we believe North American exports could comprise some15% of global LNG supply. These developments are a testament to the resilience of the industry, demonstrating its ability to cope with such a major swing in supply and demand balances.

Shell’s response

In Shell we are responding to that opportunity. We are the leading IOC in LNG. Today we hold 22 mtpa of equity LNG capacity and, once the recent deal to acquire many of Repsol’s LNG assets reaches completion, we will add a further 4 mtpa.

This $4.4 bln deal is a true testimony to our belief in the long term robustness of the LNG business. This deal will not only give us access to over 4 mtpa of equity LNG in Peru and Trinidad, but also to more than 7 mtpa of LNG off take rights, a substantial position for us which fits our portfolio and confirms Shell as a leading LNG trader.

In addition, we have 7 mtpa under construction in Australia and a further 20 mtpa of equity LNG as options and we expect to remain the leading international oil company (IOC) in the LNG industry for some time to come.

Global responses to golden age of gas

But of course the world is not perfect and the response to what the IEA has called the golden age of gas has been variable across the different regions of the world.

Far East

In the Far East we have seen an increasing appetite for natural gas, particularly to tackle air quality issues, but also to benefit from its versatility and reliability.

New LNG markets open up on a very regular basis; from Thailand to Indonesia to Malaysia. These new markets supplement demand from the traditional markets, which remains robust.

Middle East

In the Middle East 1.8 million bbl/d of oil is burnt for power generation according to the IEA, the opportunity to import LNG to create a cheaper and more environmentally acceptable alternative is clear and prudently the UAE and Kuwait have started importing LNG, others will follow.

In the Middle East, LNG is also showing its potential to serve as a rapidly deployable bridge to future domestic supplies that need more time to be developed.


In Europe, demand for natural gas and LNG has declined significantly over the last couple of years. Cheap coal exported from the USA has pushed out gas, with a more than 10% increase in the use of coal in power generation.

Europe’s old coal-fired power stations are running harder than ever before, while brand new super-efficient gas-fired power stations are being  considered for mothballing or closure.

It is ironic that many countries in Europe, crippled with debt, offer subsidies for renewable energy costing well over $100/tonne whilst current CO2 prices languish below $10/tonne.

I have no doubt that eventually Europe will see the immense value in natural gas and renewables and these energy sources will take their rightful place at the core of European energy supply, particularly for power generation.

An overhaul of the European Emissions Trading Scheme, along with the establishment of CO2 emission standards for new power generation and the introduction of a CO2 floor price, as planned in the UK are good signs that we are moving in the right direction.

It is our belief that the Far East, the Middle East and Europe will provide strong LNG demand for the medium and long-term future underpinning our estimate of a 500 mtpa global LNG market by 2025.


But as an industry we are not sitting still awaiting for governments and the public to see the benefits of gas. We are also innovating at a significant rate both in LNG supply as well as demand.

LNG in transport

We are excited about the opportunities we are unlocking for LNG in transport. In Jumping Pound, Canada, we are building our first 0.25 mtpa small-scale LNG plant for supplying trucks with LNG along a busy route: what we’re calling the “Canadian Green Corridor”.

Last month we announced new similar initiatives in the Great Lakes and the Gulf Coast to supply LNG to barges and coastal vessels ... and in Europe we recently launched the first 100% LNG-powered barge for working the waterways of North-West Europe.

This business is fast becoming material in size as fleet owners realise the economic and environmental benefit of using LNG over diesel in environmentally sensitive and regulated locations.

And the innovation of cost-competitive modular small-scale LNG schemes – such as those we are building in Jumping Pound – is extended further to Elba Island, where we have launched our first US export LNG scheme together with Kinder Morgan. The total project (consisting of two phases)

would have liquefaction capacity of approximately 2.5 mpta of LNG of which

phase one is about 1.5 mpta.

Floating LNG

Our largest and most exciting innovation, though, is Floating LNG (FLNG). Shell was the first to move ahead with an FLNG project, making FLNG a reality.

This will be the largest floating offshore facility man has ever built. It’s approximately the length of a par 5 hole in a golf course. And, when fully equipped and loaded, it will weigh more than 600,000 tonnes. This innovation will enable the development of gas resources ranging from clusters of smaller more remote fields to potentially larger fields via multiple facilities.

These projects combine the best of subsea and marine technologies and operations, with optimised LNG facility design and the might and efficiency of the Korean construction yard capabilities.

As we move into the hull and topsides fabrication on Prelude, it is clear that FLNG has yielded a step change in LNG opportunities. At Shell, we have other opportunities under consideration for FLNG development and other companies are also progressing their own concepts.

I am convinced that when we convene for LNG18 in Perth we will see many more FLNG projects under way.


So, I reiterate: the LNG industry is as robust and dynamic as ever; the natural gas revolution emerging from tight/shale gas will reinforce the LNG industry.

As an industry we need to work with governments to point out the benefits gas can provide for delivering a sustainable energy future, to encourage the implementation of regulations and policies, which will provide gas a level playing field on which to compete and take its rightful place as the leading source of global energy.

And as an industry we continue to innovate, delivering new sources of supply and new sources of demand, which provide our customers with reliable, affordable and environmentally sustainable choices to meet

their energy needs.

I sincerely hope that you will use LNG17 to allow resource holders, contractors, and customers to share perspectives and align views in order to further promote our industry, leading to a sustainable energy future, centred around natural gas and LNG.

Thank you.