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Slugcatcher feels the earth move

DID the earth move for you last week? Not, Slugcatcher adds quickly, in the way it moved for New ...

Three events observed by The Slug caused him to think deeply about the future of oil and gas in his home country of Australia, and in the wider world.

First came news that Chevron has added the Wheatstone liquefied natural gas project to its already impressive wish-list of things it wants to do in Australia.

Then came some far-reaching observations from the United States about how the Organisation of Petroleum Exporting Countries (OPEC) might actually have achieved its desired status of price-rigging cartel.

And finally came some optimistic words from Woodside Petroleum boss, Don Voelte, on how global LNG pricing is heading towards an era of parity with oil.

Some casual observers of the oil patch might see these three events as disconnected. Slugcatcher doesn't.

In fact, he is reminded whenever he sees a confluence of facts of that famous saying: "Everything is connected to everything else".

Dear old Vladimir Lenin is credited with making that comment which joins the world's dots into a coherent picture.

The Slug is somewhat less ambitious, but he can see how Chevron, OPEC and Don Voelte are in the same boat. It's the one called Peak Oil.

Chevron first. Here's a proud US oil major which has made a complete botch of a potential world-class LNG project called Gorgon.

Not only did it wait too long to push it from concept to firm plan, but it failed to get its partners, Shell and ExxonMobil, fully behind it. The company watched costs explode, and then chose an offshore island, which is also a nature reserve, as its preferred gas-processing site.

Gorgon might be developed one day but Chevron's immediate aim is to get some sort of payback (in several senses of that word) by flying solo on the Wheatstone gas resource, hopefully in time to cash in on high oil and gas prices.

Driving the Wheatstone plan is the potential for Chevron to keep its staff in Perth gainfully employed on a stand-alone gas processing project, or as a development selling gas to Woodside's Pluto development.

Either way, Chevron has decided it has dithered long enough and it's time to move.

Why is now a good time? Because of something that Washington Post writer, Robert Samuelson, pointed out mid-week; that OPEC really does appear to have succeeded as a cartel, and that sky-high oil prices are here to stay.

The Slug has never doubted this as a fact, but now scribblers of far greater influence have recognised the reality of what happens when you combine geological decline with rampant politics, so we really are at a turning point in the petroleum world.

Voelte was singing from the same hymn sheet when he said last week that the time of LNG-oil parity was fast approaching.

"We believe a molecule of gas is worth the same as a molecule of oil" - was the central theme of Voelte's argument that LNG is about to become a whole lot more important to an energy-hungry world.

These events, as Lenin said a century ago, are connected. The common thread running through Chevron's Wheatstone surprise, Samuelson's discovery that the OPEC production squeeze is working and Voelte's gas molecule lecture is the scarcity of liquid fuels.

In Chevron's case, Wheatstone could be a bargaining chip to leverage its way into the Pluto development.

In Samuelson's case, he has recognised something we saw years ago. And in Voelte's case, it is an early warning that global gas supply could be the next target for cartel-like behaviour - perhaps adding teeth to the embryonic OGEC: the Organisation of Gas Exporting Countries.

On their own these three events might cause a modest ripple in the petroleum world. Taken together, they point to big - even earth-shaking - changes ahead for the world of oil - and gas.

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A growing series of reports, each focused on a key discussion point for the energy sector, brought to you by the Energy News Bulletin Intelligence team.

A growing series of reports, each focused on a key discussion point for the energy sector, brought to you by the Energy News Bulletin Intelligence team.

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