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Predictions put Alaska gas at 2013 Houston gas summit speakers also see LNG at 5 bcf to 7 bcf a day by 2010 Larry Persily Petroleum News Juneau Correspondent
The consensus among speakers at a recent natural gas conference in Houston is that North American gas production cannot keep up with demand, that imported liquefied natural gas is the only large-scale and accessible supply growth available before the end of the decade, and that a pipeline carrying Alaska gas to market is at least 10 years away.
The U.S. Energy Information Administration has changed its view from a year ago and its next forecast will show “substantially increased” U.S. imports of foreign LNG over the next 15 to 20 years, said Guy Caruso, EIA administrator.
The agency’s next long-term forecast will say it expects to see expansion of all four existing U.S. LNG receiving terminals and construction of four new terminals by 2010, Caruso said at the Nov. 19-20 North American Natural Gas Summit in Houston, sponsored by the international oil and gas consulting company Wood Mackenzie.
He also said the agency’s forecast of a start-up date for an Alaska gas pipeline to mid-America could change. Last year’s EIA forecast pegged the proposed project’s earliest in-service date for the second half of the next decade. Higher prices, uncertainty of other supplies and possible passage of the federal energy bill with financial incentives for the project could move up that date, he said. Consultant sees Alaska gas in 2013 Purvin & Gertz, an international energy consulting firm, put the start of Alaska gas flow at 2013 in its presentation at the conference, just a few years behind its estimated start of operations for the proposed Mackenzie Delta gas pipeline in Canada.
TransCanada, the Calgary-based pipeline company, shows Alaska gas entering the market at the same time as Purvin & Gertz, about 10 years away.
“LNG’s time has come in North America,” said Barbara Shook, Houston bureau chief for Energy Intelligence and a 32-year veteran of reporting on and working in the energy industry. Alaska gas also will come to market, she said, the only question is when.
And when it comes to market, it will be through a pipeline from the North Slope to the North American distribution grid in Alberta, she said, not aboard LNG tankers serving the West Coast.
The world’s major oil companies haven’t survived for their collective hundreds of years by making bad decisions, Shook told the conference audience.
“Our feeling is we won’t see LNG from Alaska until after we have a pipeline to the Lower 48. …That’s what I’ve been told by all the major oil companies,” Shook said in an interview the week after the conference. Alaska LNG spur line possible later After the pipeline is in operation, perhaps a smaller spur line could take gas to tidewater in Alaska for LNG deliveries, she said, adding that even as a spur line the 800 total miles of pipe from the North Slope and the federal requirement for costly U.S. tankers will always place Alaska at a significant price disadvantage with other potential suppliers around the Pacific Rim.
All of the conference speakers talked about the problem of falling production from mature North American gas fields, coupled with rising demand created, in part, by the energy industry itself.
The industry promoted natural gas as the clean-burning alternative for electrical generation and heating, said David Parker, president of the American Gas Association. And while the industry continues to promote coalbed methane and other unconventional sources, the reality is that supplies cannot keep up with demand and imported LNG will take a much bigger role in the market.
Speakers were in the same neighborhood in their estimates of how big foreign LNG would become in the North America market, with projections for imports in 2010 ranging between 5 billion cubic feet per day and 7 billion cubic feet. LNG imports in 2002 averaged about 600 million cubic feet per day, more than doubling for 2003.
The Canadian Gas Association projects imports will grow to 5 bcf per day by 2010, with Purvin & Gertz estimating 5.6 bcf per day, Wood Mackenzie setting its projection at 6 bcf per day and TransCanada putting the growth number at 7 bcf by 2010 (including imports to Mexico). Sempra plans two terminals in 2007 A Sempra Energy official told the conference the San Diego-based company expects to announce LNG suppliers for its two proposed terminals by the end of January. Sempra plans to build a terminal on Mexico’s Baja Peninsula, 60 miles south of San Diego, to accept up to 1 bcf per day of LNG, with a 1.5 bcf receiving terminal planned for Louisiana. Both are expected to start operations in 2007, said Dale Kelly-Cochrane, vice president for budgets and planning at Sempra.
The company’s presentation listed 20 possible LNG sources for its new terminals, expected to cost a total of $1.3 billion, or about $50 million for each 100 million cubic feet of receiving capacity.
Ed Kelly, heard of Wood Mackenzie’s North America gas and power consulting section, identified seven likely new LNG supply sources in west Africa, the Mideast and Australia that could supply North America receiving terminals in 2004-2005, though he also cautioned that LNG will neither flood the U.S. market nor “single handedly address the U.S. gas supply shortfall.” New supplies will lag demand Imported LNG will, however, “provide a critical increment to U.S. supply,” and will respond to higher market prices, Kelly said. But that supply, plus gas from arctic Alaska and Canada, will lag demand pressure, not relieve it, Kelly said.
He also took a more conservative approach to market demand and a less pessimistic view of North America production than many of the other speakers. Demand growth will be slower than many expect, he said, citing continued demand destruction among industrial users due to higher prices. The use of coal-fired electrical generating plants also will grow, he said, citing a recent multiclient study by Wood Mackenzie.
“The worst fears are unfounded,” he said. “A shift from conventional to ‘unconventional’ plays and investment-driven strategies will not grow production, but neither will production decline rapidly.”
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