Conoco's Stice: US LNG projects shouldn't chase price differentials

Warren R. True
Chief Technology Editor—Pipelines/Gas Processing

HOUSTON, Sept. 27 -- Developers of LNG projects in the US should not make terminal-site decisions based on regional natural gas price differentials, said ConocoPhillips Qatar Pres. Mike Stice at an LNG conference in Houston Sept. 24.

Stice believes it makes more sense to place an LNG terminal in the country's major natural gas supply area—the US Gulf Coast—than to target one of the major markets for the imported gas, such as the upper US Northeast, especially New York.

Options
"If you choose to place a terminal in New York because of, say, a 40¢ differential with Henry Hub [La.] pricing," Stice told OGJ, "then your project is at risk because that differential can evaporate very quickly."

Stice considers it preferable to locate such a terminal on the US Gulf Coast to take advantage of the extensive and varied takeaway pipeline capacity that has built up over the years. Doing this retains the option of moving gas into systems serving several markets besides the Northeast, mainly in the Midwest and the West.

"The US is an homogeneous market," he told the conference. "It is not as segmented by regional markets" as some have argued. But, Stice said, "I am in a minority," referring to what he says is a consensus opinion expressed in the last National Petroleum Council study of natural gas supply and demand for North America.

Arctic gas for US
Stice also believes that Canadian Arctic gas will make it to the Lower 48.

"It will be part of the supplies that meet the expected 14 bcfd market by 2020," he said, "even if heavy oil production in Alberta draws off as much as 2 bcfd" for its operations. In fact, Stice believes Arctic gas moving into and through existing pipeline infrastructure in Alberta will drive down any price differential on the West Coast.

And he believes that the current impasse over an Alaska pipeline from the Arctic will give way eventually to a new pipeline.

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