Warren R. True
OGJ Chief Technology Editor-LNG/Gas Processing
HOUSTON, June 17 -- The US LNG industry faces several questions, according to Center for Liquefied Natural Gas Pres. Bill Cooper. He spoke recently with OGJ about the state of the industry at mid-2009.
What will climate change legislation, currently being debated in the US Congress, eventually look like? How will its provisions affect the LNG industry? Will congressional reauthorization for the US Coast Guard continue to define LNG as a threat, which Cooper and industry believe lacks basis in history or even in the commodity’s nature?
For global trade, will the US market be the dumping ground for LNG regardless of price, as many observers have expressed?
Answers to regulatory questions will have to wait, Cooper acknowledged. And CLNG has been involved in decisions about ways to educate lawmakers.
Recent industry history, however, may hold answers to market questions.
The current reality of LNG supply movements is that a combination of a robust spot LNG market, on the order of 15-20% of traded LNG, has combined with shorter contract terms and more-flexible destination clauses to make global trade more flexible than ever before.
Trade among the world’s three major markets—North America, Europe, and Asia-Pacific—has grown. This has been partly due to the scale of some supply projects, chiefly in Qatar, Australia, and to some extent Trinidad and North Africa. But this growth has been accompanied by growth in population and capacity of the global LNG fleet.
Cooper doesn’t believe that fleet has yet reached a “tipping point,” however, after which the trade more resembles the oil trade. But he thinks that point is near.
There has been a “deepening of markets,” he said, that is good for the industry and good for the natural gas consumer.
This state of the global industry, currently moderate prices, and prospects for their continuing at that level ensure natural gas availability and affordability, said Cooper.
Two effects of industry’s evolution, at least in the US, said Cooper, are that:
• The industry will not again see LNG terminals being mothballed as they were in the 1980s.
• The time has passed when LNG developers plan terminals along the US Gulf Coast to use the extensive gas pipeline network to reach major markets in the Midwest and Northeast.
Must surplus global supply come to the US because of its greater liquidity and storage capacity? Not necessarily, Cooper said. For one thing, US storage is closing in on full with levels well ahead of their 5-year average for June. And Cooper again cites the greater trade flexibility.
He also believes that, after the current crop of LNG terminals is completed and commissioned, the US market will likely enter a flat period when no new terminals will be built. Permitted projects that continue to fight through local resistance toward fruition can continue that effort so long as the sponsors are willing to pay the legal and other costs. He cited the Sparrows Point, Md., project as an example of one that seems to be making headway against stiff opposition.
This month, OGJ data show, two North American terminals are being commissioned: Canaport LNG’s St. John, NB, site and Sempra’s Cameron terminal near Hackberry, La., just downstream from Trunkline LNG’s Lake Charles terminal.
ExxonMobil’s Golden Pass terminal, in Texas on Sabine Pass across from Cheniere Energy’s new terminal in Louisiana, was severely damaged by Hurricane Ike in September 2008 and is unlikely to open this year as planned.
And at Pascagoula, Miss., El Paso Corp. is building Gulf LNG. The terminal will have an initial sendout capacity of 1.3 bcfd from two full-containment storage tanks with combined capacity of 6.6 bcf. The company says the terminal capacity is fully contracted under 20-year contracts and targets start-up sometime in 2011.
Once all these are commissioned, it will likely be some time before ground is broken for another round of terminal construction.
Contact Warren R. True at email@example.com.