DOE, industry call on local and federal regulators to coordinate LNG role

Maureen Lorenzetti
Washington Editor

WASHINGTON, DC, Dec. 23 -- US Sec. of Energy Spencer Abraham Dec. 18 said expanding liquefied natural gas imports will help keep domestic natural gas prices stable, but he added that local and federal regulators must work together to ensure those supplies reach US markets.

"There is a great deal of interest in the future of LNG in North America, as a result of which there are at least two dozen proposals out for the construction of LNG terminals in the US, Mexico, and Canada over the next several years," said Abraham at the LNG Ministerial Summit held in Washington, DC. "There are, however major challenges to the success of so large and complex an undertaking," he said.

The Department of Energy and the US Energy Association sponsored the summit, attended by 21 energy ministers representing most of the world's gas producing regions. US officials estimate LNG imports will increase by 2,000% in just over 2 decades to meet US natural gas demand, with 15 bcfd reaching North America terminals by 2025.
Abraham said regulators should speed up sitting and permitting for regasification and related facilities.

"That will require streamlined bureaucratic processes and the support of local governments and communities," he said.

Regulatory moves
Industry officials said the federal government already has taken decisive actions to speed up approvals. The new Maritime Transportation Security Act gives the US Coast Guard clear jurisdiction over offshore LNG terminals; future permit applications will be reviewed within a "discrete" timeline, according to Abraham.

Meanwhile, the US Federal Energy Regulatory Commission Dec. 18 updated its own LNG rules to be consistent with new regulations. Neither onshore nor offshore terminal developers will be required to offer "open-access" service to third parties or to maintain a tariff and rate schedule.

FERC will still retain environmental and safety regulation of new terminals, and open access regulation will apply when gas exits a terminal and enters an interstate pipeline. FERC may also step in and impose its own terminal tariffs if it determines a terminal operator is trying to monopolize a market through discrimination or anticompetitive behavior.

State and local jurisdictions are a different story. Industry officials estimate it may take as much as 5 years in some cases to update or revise laws. And there may be some regions of the country, such as California, where it may be very difficult to build anything at all because of longstanding opposition to energy-related projects.

To help reduce that resistance, Abraham said both industry and the federal government need to better address environmental and safety concerns often cited by local regulators.
"Success in this will require a concerted effort to educate the public on LNG's importance to the American economy and on the environmental and safety record of the industry," he said.

Other consuming countries face similar challenges, as will producing countries as they seek sites, approvals, and financing for their LNG infrastructure, Abraham said.

Producer views
Several current and potential LNG exporters spoke at the meeting, each pledging to be a reliable supplier to US markets.

Saudi oil minister Ali al-Naimi told the group that his country has no plans "currently" to enter the LNG export market. But the Saudis made clear they are mulling some kind of market position, given that their competitors in the region are dramatically ramping up exports.

"These plans could change if our efforts, in combination with our foreign partners, find sufficient reserves in excess of our local needs," Naimi said. "At that point we would evaluate all options—including LNG exports—in order to maximize the benefits to Saudi Arabia's economy," he said.

LNG critics, typically US independent producers, argue that expanding LNG imports will not help energy security or keep prices stable. They argue that a lot of LNG will come from countries that are either politically unstable, such as Venezuela, or distant, such as Russia. LNG opponents and their supporters on Capitol Hill also say there is the risk that some Middle Eastern suppliers, namely Qatar and Saudi Arabia, will try to corner the market by forming an LNG "cartel" similar to the one now in place for oil under the Organization of Petroleum Exporting Countries.

Government officials from Saudi Arabia and Qatar won't comment on whether there are plans to create an LNG cartel, although each country at the summit sought to assure US officials that it is in the mutual interest of producers and suppliers to have reliable, stable energy prices.

The energy security argument is a political hot potato that isn't likely to go away, especially in an election year, and at least one existing supplier to the US is offering itself up as a less risky alternative to potential investors.

Trinidad and Tobago Prime Minister Patrick Manning told the summit that it takes only 5-7 days for its gas to reach US terminals, "far faster than other competitors." Security is also a consideration, he said. Unlike many other LNG exporting countries around the world, "We are free," he said. "We are renowned for racial harmony."

Other major suppliers such as Venezuela, Russia, Indonesia, and Algeria also made brief presentations. Nigeria did not attend.

Company remarks
Top executives from every major US-based multinational oil company attended the conference. BP PLC and Royal Dutch/Shell Group also attended.

Executives generally mirrored Energy Sec. Abraham's call for better cooperation between federal and local officials on permits. Companies acknowledged their industry needs to do a better job addressing the public's concerns over LNG safety and environmental impacts.

In a keynote address, Exxon Mobil Corp. Chairman and CEO Lee Raymond said regulators must keep working on what he characterized as "consistent and complete policies" that encourage both domestic gas supply and expanded LNG.

"We must work for a future in which the immediate development of new resources and flexibility in fuel choices provide more balance to the North American natural gas supply and demand equation," Raymond said. "With so much at stake, failure is not an option."

Raymond said consumers need all the gas they can get from all possible sources, and he cited as an example his own company's $12 billion project with Qatar Petroleum to supply LNG to the US for a 25-year period and the company's long-term 1.2 bcfd LNG production activities in Indonesia to supply Asia Pacific markets. "Consuming countries need to recognize that they have an important role to play in facilitating timely energy development," Raymond added. "They can do this by creating reasonable regulatory regimes that will allow facilities to be designed and built without undue delay or unnecessary cost and relying on free competition and market solutions to meet future demand."

ChevronTexaco Corp. Vice-Chairman Peter Robertson cautioned that failure to establish North American LNG import capacity in a timely manner "could lead to gas-supply shortfalls and volatile prices later in this decade, with dire consequences for the economy."

Robertson called on all participants in the LNG industry to work more closely together on new infrastructure, especially for North America's West Coast.

ChevronTexaco is one of several large companies proposing terminals for California and Baja California, Mexico.

"The National Petroleum Council estimates that the United States will need a sevenfold increase in LNG supplies. I hope the dialogue about West Coast LNG can soon be moved to the top of the regional agenda. Uncertainty about energy is the enemy of economic development."

Robertson also acknowledged the importance of embracing the general public: "We know that LNG is an industry with an outstanding safety record—but we must appreciate that not everyone knows this. In North America and especially the West Coast, we cannot go forward unless people are fully informed and supportive."

ChevronTexaco is working on LNG-export projects in Africa, Australia, and Latin America to serve markets in Asia, Europe, and North America, where it plans to build the Port Pelican LNG import terminal off the Louisiana coast.

BP's Ralph Alexander, chief executive and managing director, gas, power and renewables, called on US officials to consider the growing demands on FERC.
"FERC does an excellent job—but we know it faces a mountain of project proposals each with its own particular set of issues. It's imperative that the commission has all necessary resources that allow projects to proceed without compromising due diligence or pace."

Robertson and Alexander made their remarks at a panel that discussed US and global LNG markets. Another panel participant, James Mulva, president and CEO, ConocoPhillips, downplayed concerns by some local gas utilities that LNG gas imports may not be able to meet quality standards of pipelines built to handle North American gas. Mulva said that LNG gas is as safe as gas from domestic basins.

Trade associations that represent large US producers and pipeline companies agreed with Mulva's statement. They said there is no technical reason why LNG gas's energy content cannot be adjusted to meet pipeline specifications. The real issue will be who pays for and what government entity will regulate gas quality rules, they said.

Related Articles

Magellan, PAA form Saddlehorn crude pipeline joint venture

02/27/2015 Magellan Midstream Partners LP and Plains All American Pipeline LP have formed Saddlehorn Pipeline Co., a 50-50 limited liability joint venture, to...

Recent CSIS report outlines main US oil infrastructure challenges

02/27/2015 The US crude oil renaissance has created strong demand for expanded US transportation systems, resulting in five primarily challenges, a recent Cen...

PetroChina mulling sale of its stake in Arrow CSG

02/27/2015

PetroChina is reportedly considering selling its half of Arrow Energy’s Queensland coal seam gas (CSG) resources.

Michie named Oil & Gas UK chief executive

02/27/2015

Deirdre Michie has been named chief executive of Oil & Gas UK, replacing Malcolm Webb, who will retire May 31.

MARKET WATCH: NYMEX crude oil prices swing down again

02/27/2015 The contract for US light, sweet crude oil for April delivery plunged by more than $2.80/bbl on the New York market Feb. 26 as volatility sent crud...

Low crude prices pressure Latin American producers, CSIS forum told

02/26/2015 Depressed crude oil prices are putting new pressure on Latin American producing countries to improve terms if they expect to attract outside invest...

Petroleum detected in fish tested after Yellowstone River pipeline spill

02/26/2015 Detectable levels of petroleum were found in tests of fish pulled from the Yellowstone River downstream from a broken petroleum pipeline near Glend...

Suriname bid round draws lackluster response

02/26/2015 The dramatic fall in oil prices is being blamed for the lack of interest shown by international oil companies (IOCs) in the deepwater offshore Suri...

House panel launches probe of DOS’s Keystone XL application process

02/26/2015 The US House Oversight and Government Reform Committee began an investigation of the US Department of State’s environmental impact statement for th...
White Papers

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...
Available Webcasts


Prevention, Detection and Mitigation of pipeline leaks in the modern world

When Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST



On Demand

Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected