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A second federal official—Jeff C. Wright, energy projects office director at the US Federal Energy Regulatory Commission—noted that switching an existing terminal from imports to exports primarily would involve installing refrigerant pumps. Building one from scratch would take 3-4 years, with storage tank construction the most important part of the process, he told the committee.
Committee member Ronald L. Wyden (D-Ore.) said FERC approved an application to construct an LNG import terminal in Oregon over state and local protests, adding that the project's sponsor now wants to configure it for exports. Wright said the new application would be subject to rigorous conditions and, if the project is authorized, mitigation measures would be identified and implemented before construction could begin.
Possible directions
US markets will continue to improve as more storage is constructed to reduce price volatility, Wright continued. More natural gas vehicles also could be introduced, particularly in fleets, while gas demand to generate electricity continues to grow, Wright said. "In terms of getting infrastructure in place to move gas away from producing fields to markets, FERC has tried to move expeditiously," he said.
Wyden also raised the issue of impacts on price in the US. He noted that spot gas prices are significantly higher in Asia and asked if US customers would need to compete with overseas consumers for gas produced domestically. Smith said DOE already considers price consequences as it reviews each LNG export application, adding that US gas prices are volatile but primarily driven by North American demand. Gas prices also are significantly less fungible than crude oil's since there are about 11,000-12,000 crude tankers in the global fleet, compared to a fleet "somewhere in the hundreds" for LNG tankers, he added.
Another witness—Kenneth B. Medlock III, deputy director of the energy forum at Rice University's Baker Institute for Public Policy in Houston, said direct comparisons of US and Asian gas prices don't always consider that overseas sales are not in dollars, and that the US currency's direction creates arbitrage opportunities. Commercial interest in markets will determine where US gas is consumed, he suggested.
DOE also is working with other countries to export technology as well as LNG, but is not considering natural gas liquid exports, Smith said. "We're looking at ways to increase opportunities for American companies to increase LNG supplies worldwide," he told the committee. "The department also values the sanctity of contracts. As we do our work, we'll make certain they stand up to Natural Gas Act obligations. If the situation changes, DOE has the authority to revisit agreements for national security reasons."
"Certainly, outside of North America, shale gas formations exist," said Medlock. "Whether technologies can be transferred abroad is not as great a factor as access for a wide range of operators. Governments control more of the resources abroad. Smaller producers in the US were able to develop resources here that would not always be available overseas."
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