ChevronTexaco executive: Natural Gas Exports Are a "Bonus Prize" for Africa
Regional-USA, Economics, 11/24/2003

The president of ChevronTexaco Overseas Petroleum Inc. used the words of Kenya-born novelist M.G. Vassanji to describe Africa's move into the rapidly expanding international natural gas business: "I feel dazed and numb. The second prize feels like a bonus."

Vassanji, according to ChevronTexaco President George L. Kirkland, made that statement when he recently won Canada's Giller Literary Prize for the second time. Kirkland likened Africa's move into the natural gas market to a second prize on top of its first prize: oil.

The ChevronTexaco executive was speaking November 20 at the Corporate Council on Africa's (CCA's) second annual Africa Oil and Gas Forum, held at Houston's Wyndham Greenspoint Hotel.

"Today I would like to suggest that Africa is on the verge of winning a second prize in the form of a new and rapidly growing natural gas business. It, too, is a bonus," Kirkland told his audience on the second day of the three-day conference. "The growing world demand for natural gas has enormous potential to bring added benefits to Africa's economy and its people."

For years, Kirkland said, natural gas was a resource looking for a market -- but today, it has become a "bonus" for Africa, in addition to the continent's large oil reserves. Natural gas, he said, now flows directly from Africa's energy development -- an area in which ChevronTexaco is committed to spending more than $20 billion over the next five years.

"The benefits of natural gas go beyond new jobs and capital," Kirkland said. "Natural gas offers Africa environmental gains, greater industrial diversity, more prospects for regional cooperation, and new trading opportunities and relationships with the rest of the world."

A new global energy business is rapidly emerging, said Kirkland, and that business is natural gas. "The United States needs to keep its lights on, Europe [needs] to rejuvenate its industry, and developing countries [need] to boost growth. All of these areas need natural gas for a cleaner environment."

Suddenly, he said, the natural byproduct that often comes out of the ground when oil is extracted is in great demand. For many years, he noted, natural gas was just "flared" or burned off at the well site because of a lack of markets.

In the United States, where gas well sites are being depleted at a rate of 29 percent annually, demand for imported gas is expected to surpass that of Japan in less than 10 years, Kirkland said. Currently, Japan ranks as the leading importer of natural gas, he added.

Kirkland said liquefaction is the key to globalizing natural gas and finding a market for stranded reserves like those off the coast of West Africa. Liquefying gas into LNG (liquefied natural gas) dramatically shrinks required storage space, he said. A single LNG tanker can transport as much natural gas as 600 tankers at atmospheric pressure, he added.

In the past, Kirkland said, natural gas was mostly a localized, isolated business because of the difficulties in storing and transporting the commodity. Today, however, LNG's reduced costs make it a viable option for locations like Africa, he said. Nigeria -- which has large natural gas reserves offshore -- now boasts the fastest-growing LNG business, he noted.

By 2006, Kirkland predicted, Nigeria's Bonney LNG project, with its six processing plants, will place Nigeria third among the world's LNG exporters. Other African countries such as Angola, Algeria, Equatorial Guinea, and Egypt are considering or expanding their natural gas and LNG capacity, he said.

Demand for natural gas is spurring other exciting projects in Africa, he said, which range from transregional pipelines to the world's first commercial-scale, fuels-only, gas-to-liquids plant.

The West Africa Gas Pipeline (WAGP), which is now under development, will ship formerly flared Nigerian gas more than 600 miles to Ghana, Togo, and Benin, Kirkland said. He added that he is proud that ChevronTexaco is a partner in that $500 million project.

Kirkland said that any risks involved in expanding natural gas exports from Africa will be balanced by the great rewards:

--ÊA cleaner environment. Much of Africa's gas development will reduce greenhouse gas emissions by using millions of cubic feet of gas a day that otherwise would be burned off -- a double benefit for the environment.

--ÊEconomic benefits. Natural gas enjoys a steeper projected growth curve than oil, at least over the next 20 years. That, Kirkland said, is good news for African jobs, investment, and local contractors.

--ÊImproved regional cooperation. Projects like the West Africa Gas Pipeline (WAGP), he said, distribute economic benefits to several nations, and the success of those projects involves governments and the private sector working together. The same thing can be said internationally, he noted. Because natural gas is traded internationally, he said, it offers a fresh opportunity for developing and developed nations to establish lasting relationships with one another.

Kirkland said that in many ways the natural gas business today looks like the oil business did 50 years ago. This is especially true in Africa, he said, where LNG producers are still in the early stages of building links between growing gas reserves and potential customers.

While there are sure to be "growing pains," he said, "the potential economic, environmental, and social gains will make the struggle worth it."

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