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Vol. 10, No. 17 Week of April 24, 2005
Providing coverage of Alaska and northern Canada's oil and gas industry

LNG imports just starting

U.S. imports up 29%; a single new terminal can handle more than all facilities unloaded in 2004

Allen Baker

Petroleum News Contributing Writer

The United States imported 652 billion cubic feet of natural gas as LNG last year, 29 percent more than in 2003, and nearly triple the figure the year before. That liquefied natural gas provided 3 percent of the nation’s gas consumption and 15 percent of total imports, according to the U.S. Energy Department.

But it’s really a drop in the bucket compared to what the future is likely to hold. Last year’s shipments — to just four terminals — amounted to 1.8 billion cubic feet daily. That’s less than some of the new terminals will be able to handle all alone.

Take Cheniere Energy’s Sabine Pass facility in Louisiana, where ground was broken March 23. It can accept and regasify LNG that will produce 2.6 billion cubic feet daily. You can add to that the similar Cheniere facility in Corpus Christi, Texas, another terminal of the same 2.6 bcf capacity that got federal approval for construction April 13.

Those two alone could handle three times last year’s imports.

Tanker regasification

Then there’s the Gulf Energy Bridge deepwater LNG facility, which just unloaded its first cargo of 3 billion cubic feet of natural gas in April. It uses a special purpose tanker that regasifies the cargo aboard ship, then sends it to shore as a gas.

That far offshore setup, basically a submerged buoy connected to a pipeline 116 miles off Louisiana, is the first new LNG import facility in the U.S. in two decades. The facility, owned by Excelerate Energy LLC of The Woodlands, Texas, has a capacity of nearly 700 million cubic feet daily.

Capacity isn’t production, of course. The four terminals operating last year unloaded 244 cargoes, but they sent out only about half their total capacity of 3.7 billion cubic feet daily. But the industry is expanding and those terminals could easily get busier.

Take the five existing operations, and add only the North American terminals whose permits have been approved, and you get a capacity of 18.5 billion cubic feet daily. Those terminals operating at just 55 percent of capacity could bring in more gas than the 10.1 bcf daily that Canada supplied to the U.S. last year.

Put another way, the terminals — just the ones operating or approved — could unload four times the amount of natural gas (4.5 bcf/day) that the proposed line from the North Slope would carry to Lower 48 markets.

And that’s just the terminals that already have their permits. There are three or four dozen more in the planning and permitting stages.

Everybody says that not all of them will be built. But the number that do come on stream could surprise a lot of people, including those who say LNG will never compete on price with pipeline supplies.

Growth ahead

The U.S. Energy Department figures LNG imports will amount to nearly 7 bcf daily by 2010, or 10 percent of U.S. consumption, and something like 18 bcf daily by 2020, providing 20 percent of the U.S. gas supply by then.

Could that be conservative? It might well be.

Huge LNG production facilities are being constructed around the globe, notably in Australia, Qatar, Indonesia, Nigeria, Trinidad, and on Russia’s Sakhalin Island. And a great fleet of huge new LNG tankers is under construction or on order. There are major economies of scale here.

Much of the system is targeting skyrocketing Asian demand. But customers are always welcome, and North America is the world’s great consumer — for now, at least.

Trinidad leads so far

Of the 244 LNG cargoes unloaded in the United States last year, 70 percent came from Trinidad and Tobago, which dominated shipments to Everett, Mass., Cove Point, Md., and Elba Island, Ga., the Energy Department reported April 14.

Algeria provided 18 percent of imports, and was the big supplier for the terminal at Lake Charles, La. Tankers also arrived in those ports with LNG from Malaysia, Australia, Qatar, Nigeria and Oman.

Many of the new terminals are planned along the Gulf Coast, where the industry has major pipelines and other infrastructure, and the populace is more receptive. A big cluster is also in the planning stages along the East Coast to take advantage of the huge population and demand there, though those are running into more local opposition.

But while Trinidad, Algeria, and Nigeria are logical suppliers for the eastern United States, LNG from big developments in Asia is more likely to aim for closer West Coast markets. Qatar, sitting on the world’s largest gas field, is about the same distance from either one, and far closer to India and China.

To serve the West Coast market, half a dozen terminal projects are in various stages of development in Southern California and nearby in Mexico. Plus there are four in the works in Oregon, including a new one on the Columbia River.

Big Australian players Woodside and BHP Billiton are involved in a pair of offshore California LNG terminals. Shell controls a big chunk of capacity at Sempra’s Baja terminal, already under construction near the U.S.-Mexico border, and has Sakhalin and Australian gas to ship there.

BP has a major contract with Sempra to send LNG from Tangguh to the same terminal. ChevronTexaco, which is adding Unocal gas holdings to its own Asian reserves, is involved in another Mexican LNG port.

Oregon options

A new terminal proposal for Bradwood, Ore., has moved ahead of other projects in that state with a formal proposal to the Federal Energy Regulatory Commission in March. The Northern Star LNG project would be built at an abandoned and fairly remote lumber mill site about 38 miles from the mouth of the Columbia, with a 35 mile pipeline planned to hook it into a nearby Williams pipeline. The terminal would be sized for a billion cubic feet daily at the start, but the 36-inch pipeline could handle 1.5 bcf, according to FERC documents.

Besides the Bradwood proposal, Oregon terminals are also in planning stages at nearby Astoria, right at the mouth of the Columbia (also 1 bcf per day), at St. Helens on the Columbia closer to Portland (0.7 bcf/d) and a tiny one at Coos Bay, down the Oregon coast (0.13 bcf/d).

Farther north, two smaller terminals have been proposed in Canada just south of the Alaska border, at Prince Rupert (0.3 bcf/d) and nearby Kitimat (0.6 bcf/d).

With all the attention on import terminals, the nation’s sole LNG export facility continues sending out its product to Japan, as it has since the late 1960s. The Nikiski, Alaska, plant owned by ConocoPhillips and Marathon exported LNG equivalent to 62 bcf in 2004, about a tenth of the amount that came to the United States from other parts of the globe.



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