Global use of liquefied natural gas is growing at 8% a year, increasing demand for plants and raising construction costs, said Hassan Marican, CEO of Petroliam Nasional.
May jump by 200 million metric tonnes a year by 2015
SINGAPORE: Global use of liquefied natural gas is growing at 8% a year, increasing demand for plants and raising construction costs, said Hassan Marican, chief executive of Malaysian state oil company Petroliam Nasional.
Oil and gas companies are boosting expenditure and pouring money into energy projects as they upgrade and expand refineries, Hassan said at the opening of the two-day Asia Oil and Gas Conference in Kuala Lumpur on Monday.
“Combined with shortages in human capital, equipment and materials, this cost escalation has resulted in numerous project delays along the entire value chain and have impacted the safety, efficiency and quality of operations,” Hassan said.
Petronas, as the company is known, and rivals including ConocoPhillips face rising costs because high oil and natural-gas prices stoke competition for labour, steel and construction goods. Global demand for LNG may jump by 200 million metric tonnes a year, or more than double by 2015, compared with 2006, Purvin & Gertz Inc, a Houston-based energy consulting firm said June 4.
Higher costs may lead to the cancellation of several refinery projects in Asia and the Middle East, according to Fereidun Fesharaki, chief executive of FACTS Global Energy Inc.
In the past year, the cost of developing refineries and oil projects have jumped about 50%, Arun Balakrishnan, chairman of Hindustan Petroleum Corp, said at an interview on Monday. The company, India’s second-largest state refiner, is considering building a refinery at Visakhapatnam in Andhra Pradesh, he said. The price of crude oil increased by 20%in 2006, but daily charter rates for drilling rates have surged more than 200%, according to Petronas’s Hassan. Prices of steel pipes have climbed 40%. “The intensifying pace of industry activities is absorbing all of the available capacity in our service sectors and has driven up costs, often out of proportion with the increase in crude price,” Hassan said. “It is a high price, high cost and high stakes industry,” he said. LNG is natural gas that is chilled to a liquid for transportation by ship to destinations not connected by pipeline. It’s turned back into gas for distribution to power plants, factories and households. —Bloomberg
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