What connects LNG to 4G and the M25…?

Having commented on oil in recent posts, the recent  announcement of a giant 30tcf gas discovery offshore Egypt by ENI is a great segue to thoughts on gas.

It will have been hard to miss the Shell-BG merger announced earlier this year.  This deal was seen by many in the immediate aftermath of the announcement as a read-across that Shell was betting on a high ($85) future oil-price.  Many took comfort from this.   This view was however generally quite short-lived, with the significant synergies in the BG and Shell gas businesses, both upstream and mid-stream; it looks much more probable that Shell have in fact taken a strategic view that gas is the fuel of the future.  More recently the Woodside-Oil Search potential merger is largely about gas also.

As if to ensure we get the picture, Shell recently suggested dropping “oil” from its usual name “Shell Oil” (admittedly from the US subsidiary only).  And the industry/finance interface The Oil Council has rebranded itself the  Oil & Gas Council.   Is there a hidden message here somewhere?

Whilst this gas-driven M&A and re-branding activity was going on, Kosmos announced a very significant gas discovery offshore Mauritania (probably spilling across the border into Senegal).  Based on the discovery well, resources were being quoted as 5 tcf, 12 tcf and in some cases 20 tcf.   Even the low end of this is a sizeable gas discovery, and it is located relatively  close to the European market.  So how did the market react?   Well, a nice 10% spike on the announcement followed by a decline to pre-discovery levels within a couple of weeks.  A huge shrug and a sigh.   Ho Hum, more gas.

So some pretty conflicting messages then.

The origin of the market apathy is actually quite easy to see; just as with oil, it looks like over-supply coupled with a stagnation in demand.   

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