Oil Majors Are Stepping Up Their Natural Gas Game

Some of the world's biggest oil and gas companies are turning to the latter hydrocarbon in order to top up their earnings, according to new research.

Energy consultancy Wood Mackenzie reckons many major players are pumping more gas than ever before, with better technology and lower costs playing an incremental part in proceedings.

While it is perhaps too early to herald a wholesale shift in operational focus, such moves by an industry primarily focused on crude oil are worth taking note of, with the energy consultancy flagging Total as one case in point, among several.

For the French oil major, natural gas now accounts for actually 61% of headline output, up from 47% as recently as a decade ago. Its rival BP has ambitious plans of its own. The company launched eight new projects last year and is set to launch seven more over the course of this year.

Majority of these are related to natural gas with BP planning to boost production by around 900,000 barrels of oil equivalent by 2021. And who can forget Royal Dutch Shell’s $52bn swoop for BG Group in 2016, widely deemed by the market as its big bet on natural gas.

Collectively speaking, BP, Exxon Mobil, Royal Dutch Shell, Total and Chevron Corp have increased their total natural gas output 15% in the past decade, says Wood Mackenzie.

The aforementioned are tipped to post double-digit quarterly profit growth over the upcoming quarterly results season, according to a Reuters analysts' poll.

So what is afoot here that's making natural gas a high growth commodity for these guys? For starters, the secondary hydrocarbon has acquired currency as a bridging fuel in the quest for a low carbon future at the expense of coal.

And while transporting LNG, always had, and still does have, limitations, the fuel medium is now much more palatable for the industrial and power generation complex given the world's energy needs and abundance of supply.

Much of it is courtesy of the U.S. shale bonanza that has seen incremental volumes of American cargoes compete with Qatari and Australian ones in a competitive global market.

Given its recent uptick in natural gas projects, Australia will be overtaking Qatar as the world's largest LNG exporter fairly soon, with more than 80 million tons per anum (mtpa) of liquefaction capacity down under.

That said Qatar is not going to take it sitting down, with its government having vowed to increase production capacity from 77 mtpa to over 100 mpta by 2022-23.

The U.S. - powered by the spirit of private enterprise - will be in the mix too. It has been tipped by many to be the world's second largest exporter of LNG by the end of 2022, and emerge as the top exporter by the middle of the next decade.

Much of this is music to the ears of leading Asian natural gas importers such as Japan, India, South Korea and Taiwan, who in the wake of the Fukushima Nuclear tragedy had to contend with prices as high as $20/MMBtu at one point in February 2014. By the looks of things, it is not just Asian users but big oil producers who are enjoying the clamor for natural gas too.