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The LNG market, hardly uniquely across commodities and equities more generally, may be facing short-term demand challenges and price volatility. But, beyond the immediate future, there is a lot to be positive about for the future of gas, says Alex Volkov, vice-president Global LNG Marketing at ExxonMobil.
The energy industry—and industry at large—is going through some unexpectedly tumultuous times. What is your view on future energy demand and has this changed at all given the current circumstances?
Volkov: It is a much overused word, but it is true that we are going through ‘unprecedented’ times. Over the past months we have witnessed a pandemic, unstable market conditions, and the plummeting of oil and gas prices. All of which have led to some analysts to have a pessimistic economic outlook—but only for the short term. Despite the high levels of uncertainty we are currently experiencing, we must remember that there will be a recovery. ExxonMobil has always taken a long-term view, particularly with regard to economic development and energy demand scenarios.
Our Outlook for Energy explores our perspective on demand and supply of energy through to 2040. While 2020 has seen a growth slowdown in both, I believe that this will be temporary and that our projections for steady energy demand, particularly for natural gas taking up an increased share of the energy mix, will still stand.
Do you see this as an opportunity or a threat for the future of natural gas and LNG?
Volkov: There is a lot of opportunity for natural gas and LNG to make more of an impact on the global energy mix. As I said earlier, there will be continued demand for energy, but with citizens around the world experiencing cleaner air conditions over the past weeks and months, I think there will be increased pressure on governments to use cleaner energy sources, and natural gas is ready to take on a much more prominent role in the energy mix.
While natural gas prices are at lower levels, the competitiveness of natural gas versus coal is improved. As a result, we expect to see an acceleration in the rate of replacement of coal-fired power generation with natural gas. Natural gas produces up to 60pc fewer CO2 emissions than coal—leading to significantly fewer pollutants, which in turn would have huge environmental benefits.
In addition, we are working to develop the next generation of energy solutions, including advanced biofuels; carbon capture and storage; natural gas technologies; and new energy efficiency processes. In addition to our robust in-house capabilities, we collaborate with leading research and technology companies, national labs and universities and others involved in breakthrough energy research.
What impact is this likely to have on the energy transition?
Volkov: If energy buyers consider looking at the current situation as an opportunity, I think this will help accelerate the energy transition.
In addition to its ability to replace coal, natural gas is also the ideal partner to support power generated by intermittent renewables (solar, wind, etc). It is reliable, efficient and flexible—making gas well-suited to help meet peak demand and play a crucial role in securing our cleaner energy future.
LNG in particular is a game changer, allowing us to ship this cleaner-burning fuel in quantities that we have not seen before, to destinations where it is needed all over the world. The technological and commercial advances that the industry has put in place over the last decade—such as floating storage and regasification units, small-scale LNG and flexible supplies—have enabled and will continue to power additional demand growth.
ExxonMobil is a major player in some key LNG projects around the world. What impact has the economic downturn had on these projects and how is the economic situation affecting the financing of these projects?
Volkov: ExxonMobil has announced that it is reducing its 2020 capital spending by 30pc and lowering cash operating expenses by 15pc. This comes in response to low commodity prices resulting from oversupply and demand weakness from the Covid-19 pandemic.
Capital investments for 2020 are expected to be down from the previously announced $33bn level. Reduced spending is being achieved through increased efficiencies, lower market prices and slower project pace including our upstream projects and expansions of downstream and chemical facilities.
Nevertheless, ExxonMobil remains committed to its global LNG business. Due to market conditions, we are mindful that some projects may evolve at a slower pace than originally anticipated. We remain in constant contact with all of our partners, customers and other stakeholders, and will continue to monitor market developments and take action as appropriate.
What message do you want to offer to customers and partners at this time?
Volkov: We highly value the customer relationships we have established over many years, making us a reliable partner of choice. We will continue to be an active partner and look forward to a more dynamic and active market environment where our regular business and trading activities can thrive.
I recognise many of our customers, partners and stakeholders are suffering in these challenging times. It is important we stay connected so that we can all work through the difficulties the energy industry is experiencing and towards the resumption of economic growth and a brighter future.
I would encourage our customers and partners to reach out to us, either directly to their business contact or by sending us a message via www.exxonmobilLNG.com.
Do you have any final thoughts that you would like to offer?
Volkov: We are going through very challenging times and we are demonstrating resilience in face of adversity. We must also keep our minds open to the unexpected opportunities that will arise from this. There is reason to be optimistic about the future and hopefully we will emerge from this situation stronger and wiser.
Alex Volkov was named vice-president Global LNG Marketing, ExxonMobil Upstream Oil and Gas Company on 1 April 2019. In his role, he has global responsibility for ExxonMobil’s LNG portfolio and marketing of LNG for ExxonMobil’s projects and joint ventures. Alex is based in Houston, Texas. Prior to his current role, Alex was vice-president International Gas, ExxonMobil Gas Marketing Europe, located in the United Kingdom. He was responsible for ExxonMobil’s natural gas marketing activities in Europe, Russia, the Caspian region, Malaysia, Thailand and Australia.
Visit www.exxonmobilLNG.com for more information about ExxonMobil’s LNG activities. You can also follow ExxonMobil on Twitter @XOM_NatGas and visit ExxonMobil LNG on LinkedIn.