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LNG imports expected to provide major slice of U.S. future supply One sixth of the gas burned in 2025 could come from overseas Allen Baker
Liquefied natural gas from overseas could amount to 17 percent of U.S. gas consumption by 2025, according to projections by the National Petroleum Council.
LNG imports could climb to 15 billion cubic feet daily, at a cost of more than $27 billion a year based on $5 per thousand cubic feet, roughly the midpoint of the council’s cost projections. And there’s plenty of gas to be had.
The council estimates world reserves of gas are 30 times those in North America. International prices are also lower, at least at the wellhead.
That LNG, plus gas from two big Arctic pipelines, could provide a quarter of North America’s needs, while traditional basins would produce the rest.
Imports of LNG have been very small up to now, as price considerations and the lack of an international tanker fleet limited that source to less than 1 percent of America’s consumption.
Some terminals were constructed and then quickly mothballed. But those facilities have been reopened in recent years as domestic prices rose.
Currently four LNG terminals are operational, with the capability of adding a little more than 2 bcf daily to the nation’s gas supply. Expansions could bring their flow to 4 bcf or so, nearly a third of the imported gas the council figures will be needed in the first quarter of the century.
Other projects on the drawing boards could add more than 30 bcf of capacity, so clearly some of them won’t be built any time soon.
Improved efficiency The cost of making LNG has been refined in the nearly four decades since Phillips Petroleum built its pioneering plant in Nikiski to chill Cook Inlet gas to 258 degrees below zero so it could be shipped out in liquid form.
In the last decade alone, advances in liquefaction and transportation technologies have cut the unit cost of LNG by 30 percent, according to National Petroleum Council analysts.
With higher U.S. prices, large quantities of gas available in remote locations such as Qatar and the South Timor Sea, and the improved technology, the product is now viewed as cost-competitive with North American gas. Thus the race to build new terminal facilities.
But the LNG supply chain is an expensive one — rivaling the cost of a gas pipeline from the North Slope and more. Producers must construct a liquefaction plant at the source, add an expensive tanker fleet, and then there’s the regasification facility.
The council estimates the total capital cost at $5 billion to $10 billion per billion cubic feet of capacity.
Even at $20 billion for the system, the Alaska gas pipeline would only run $5 billion for each billion cubic feet of capacity.
For either supply system, there’s a gigantic up-front expense and an uncertain payoff that doesn’t start until years later. Permit issues The National Petroleum Council says government can help by streamlining the permit process for an LNG terminal to be completed in a single year. Under current regulations, permitting can take more than two years for a land facility, though an offshore unloading terminal can be cleared for construction in a year.
If siting issues or other political considerations delay those terminals, supplies could get very tight.
The study examined a scenario in which import capacity was reduced by 6 bcf daily, and found the average gas price nationwide would rise 10 percent.
“Clearly the ability to import increasing volumes of LNG is important to achieving a more comfortable supply/demand balance,” the report says.
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