Two years ago Marathon Oil Corp. began moving in a more high-profile way to pursue an international, integrated gas strategy. Today that is bearing fruit, according to president and chief executive Clarence Cazalot, because the natural gas industry itself has changed. What has changed? "Global gas demand is growing at a faster rate than previously forecast, and by 2020 will outstrip that of oil. That's quite an achievement," Cazalot told IPAA and Texas Independent Producers and Royalty Owners (TIPRO) members at a recent Houston program. Second, remaining gas reserves are twice those of oil, according to BP's World Review for 2002. A big key is commercializing reserves that are in "awkward" places, stranded far from markets, but that too is changing due to lower production costs, better technology and new ways to transport the gas, especially if it's in the form of liquefied natural gas (LNG). "From 1985 to 2000, LNG costs have declined substantially," Cazalot said. LNG is a cornerstone of Marathon's approach-the company has projects in Alaska, Equatorial Guinea, Qatar and Mexico. LNG represents the fastest-growing form of gas demand. From 2003 to 2008, global oil demand will grow 2%; global gas demand, 3%; global LNG, 10%; and LNG in the U.S. alone, 28%, he said. To take advantage of these trends, Marathon has organized three business segments: exploration and production, refining and marketing, and integrated gas. "We want to supply nations in the [Organization of Economic Cooperation and Development] and we think there is far more supply than is needed. It is going to be critical to have excellent relationships with national oil companies. "Despite our best efforts drilling in the U.S. and Canada, there is still a substantial gap that can be filled by LNG. But there will not be 35 regasification plants built in the U.S. as has been proposed. We'll probably see only half that number." Since 1969 Marathon and the former Phillips Petroleum have taken gas from Cook Inlet, Alaska, and sent it to Tokyo in the form of LNG. Today Marathon is moving forward on its Tijuana Regional Energy Center in Mexico, which will include a regasification plant to receive LNG, a desalinization plant and a power-generation plant, with the LNG supplies possibly coming from Peru and Bolivia, the Far East, or even Alaska, he said. This will create arbitrage opportunities between prices and geography. And the company is pursuing its integrated strategy in Equatorial Guinea as well, with partner Noble Energy Inc. They produce 800 million cu. ft. per day from Alba Field. Train I of an LNG plant is being built, with first production to come onstream in 2007. The LNG is already contracted to BG and will land at Lake Charles, Louisiana. "We get to book our share of the 3 trillion cu. ft. of gas in the field when we commercialize it in 2007," Cazalot said.
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