Bubble sizes in the figure oppisite are in proportion to proved gas reserve volumes. Red bubbles represent significant gas importers; green bubbles represent gas exporters and potential exporters.

Production, Consumption, Exports, and Reserves

The figure shows the ratio of natural gas production to domestic consumption (i.e., exporters have a P/C ratio greater than 1) versus their net natural gas export position for key countries. The horizontal axis shows exports minus imports. This metric provides a negative number for net importers and a positive number for net exporters. Each country’s bubble size is proportional to its proven natural gas reserves.

Gas importers trend towards the southwest and gas exporters towards the northeast in the figure. Exporters are spread across the northeast quadrant irrespective of their reserve holdings. Politics and gas development strategies are as important as reserves in determining a nation’s gas development. The graphic highlights the relative status of gas producing and consuming nations.

The U.S. is still a significant reserves holder, but with consumption outstripping demand at an increasing pace it can be expected to trend further towards the southwest.

Russia, on the other hand, is the largest reserves-holding nation and can be expected to trend further towards the northeast. Gazprom is busily trying to diversify its entry points into Europe, open up gas exports using new pipelines to China, and control and limit gas exports from competing suppliers. Its strategy includes strategic alliances with large utilities and IOCs with substantial gas sales positions to help it maintain a hold on its main markets (such as Germany and Italy).

The main gas importing nations (Japan, Germany, Italy, Spain, South Korea, and Turkey) plot distinctly in the southwest quadrant of the figure and are likely to move further to the southwest as their domestic demand for imported gas grows.

Norway is able to maintain its enviable status due to its low population and its close proximity, geographically and politically, to western Europe. Its strategy is to develop further infrastructure ties with both western and eastern Europe and to exploit Barents Sea gas resources. Statoil is well positioned to control the pace of key gas supply chain developments and is also seeking strategic alliances with other major gas producing NOCs (such as Gazprom and Pertamina) to gain access to international reserves.

Algeria continues to exploit its large gas resource base and proximity to southern Europe through pipeline and LNG projects. It has secured substantial capital investment in its gas sector by cooperation with IOCs, and continues to do so. Algeria’s state-owned energy company, Sonatrach, has been following a strategy to extend its controlling share in projects involving IOCs, and in tight supply markets has sought higher prices for its gas.

Nigeria is in an unusual position due to its large gas resources and limited domestic consumption, in spite of rapid growth in LNG exports over the past decade. As gas exports grow and domestic gas consumption increases, Nigeria should be expected to move eastward in the graphic.

Without political change, Bolivia is unlikely to move anywhere as YPFB, its state company, is currently involved in nationalization strategies that will inhibit future export projects.

Libya should move northeast in the figure with current investment and development of gas infrastructure, and it is doing this through new and extensive cooperation with IOCs.

Qatar, with its massive gas resource base, is moving rapidly towards the northeast. With large new capacity materializing, including liquefaction plants and pipelines (such as Dolphin onstream July 2007), GTL, and petrochemical projects, its net exports are set to increase rapidly in the short-term. Qatar Petroleum (QP) continues to follow a strategy of diversification through close alignment with IOCs while maintaining a large controlling interest in all of its gas development projects, plus shipping and regasification infrastructure downstream along the supply chain.

Despite their vast gas reserves, Iran and Venezuela are not major gas exporters. Political issues continue to dominate gas strategies of both NIOC and PDVSA. Both have been discussing LNG and GTL projects with IOCs for many years. However, none have materialized due to project control issues and the IOCs’ concern that once billions of dollars are sunk into the projects, they will be unable to participate in their long-term revenue streams. These countries have the potential to move significantly towards the northeast, but are unlikely to do so in the near future.

Saudi Arabia is also rooted near the origin of the figure for different reasons, having followed a strategy not to export natural gas, but to focus on domestic energy projects and develop its petrochemical industry with natural gas feedstocks. Saudi Aramco has managed to develop its gas resources in line with this strategy without the direct involvement of IOCs, the only nation to do so successfully. At the current time there is no indication that Saudi Aramco is likely to adopt a gas export strategy.

China and India continue their efforts to increase their natural gas supplies and develop the infrastructure needed to import gas, especially as LNG, into their markets. CNOOC and ONGC are following strategies of participation in international upstream exploration projects, but are finding access to substantial volumes of gas at delivered prices of $3 to $5 per million Btu increasingly difficult. Both have preliminary agreements for gas cooperation with Iran involving large-scale long-term LNG (and possibly pipeline) development projects. Growing energy demand and development of gas infrastructure projects suggest that they will move more towards the southwest over the next decade.

The value of natural gas is now well appreciated by nations and NOCs. In spite of taking more control over their oil and gas resources, many NOCs recognize that a continued relationship with IOCs for technological, financial, and risk-management assistance helps to develop their natural gas industries and move them towards favorable net export positions.

Gas consumption and export activities continue to expand in many countries. The high capital costs, complex technical issues, supply chain risks, and vast financial requirements associated with developing gas resources continue to be an incentive for NOCs to work in partnership with IOCs. For political reasons some countries, such as Iran, Venezuela, and Bolivia, are reluctant to do so on terms that would make sense for IOCs’ meaningful participation. The gas industries in these countries will continue to struggle to reach their export potential.