LNG's wide-ranging challenges can be met, experts say

April 25, 2005
Increasing LNG imports’ contribution to total US natural gas resources poses a wide range of challenges, four experts conceded during an Energy Information Administration conference Apr.

Increasing LNG imports’ contribution to total US natural gas resources poses a wide range of challenges, four experts conceded during an Energy Information Administration conference Apr. 12 in Washington, DC. But they also agreed that the challenges can be met because of the oil and gas industry’s extensive experience with LNG.

That’s especially significant to multinational oil companies such as ChevronTexaco Corp., which has more than 100 tcf of gas reserves worldwide. Much of that gas can’t be commercialized readily because it’s not close to markets or pipelines, noted Bruce A. Johnson, vice-president and general manager of ChevronTexaco Global Gas in Houston.

“From our perspective, success will be measured by getting those stranded resources commercialized. That will be accomplished best by participating all along the value chain,” he said during a session on LNG terminal siting issues during EIA’s 2005 Midterm Energy Outlook and Modeling conference.

“When we look at the value chain, we see potential for both LNG and gas-to-liquids plants,” Johnson continued. “North America is an obvious market for large volumes of gas because it has the demand and the infrastructure.”

EIA expects LNG imports to be an increasingly necessary component in the domestic supply mix. It forecasts US demand reaching 30.7 tcf/year by 2025, while production will rise only to 21.8 tcf/year, creating a 28% shortfall, said Phyllis D. Martin, senior energy analyst in EIA’s integrated analysis and forecasting office.

The strongest growth in gas demand will continue to come from electric power generation, she indicated. “Right now, even though coal prices are lower, natural gas-fired power plants still cost less money and take less time to build,” she said.

EIA’s forecasts also assume that Alaskan gas will start to reach markets in the Lower 48 by 2016, according to Martin. But federal energy analysts anticipate that more LNG imports also will be needed.

“We now have access to the world for LNG,” Martin said. “In the past, Algeria was our primary supplier, but that began to change in the late 1990s. Now, Trinidad and Tobago provides 75% of our imports.” She identified technology and siting as the two main issues facing companies that want to build new US receiving terminals.

Technology, siting

Houston-based Cheniere LNG Inc. addressed those issues by focusing its growth strategy on the US Gulf Coast, noted Patricia Outtrim, vice-president for government affairs at the Cheniere Energy Inc. subsidiary. The region not only has the world’s heaviest demand for gas but also already has infrastructure to distribute gas to other parts of the country, she explained.

“Because we moved quickly, we got some of the best locations for siting an LNG facility,” she said. “You need a deepwater port, with adequate available land. LNG, like oil refining, depends on economies of scale. Our sites will be among the largest in the US. We also wanted to be flexible in terms of send-out for ChevronTexaco and our other customers.”

Cheniere Energy has four projects in various stages of development, with scheduled openings from 2008 through 2010. Outtrim said that the company emphasizes conventional technology because of its record for safety and reliability. It also stresses community education before preparing any applications for permits. “We have laid the groundwork for easier permitting, easier construction and, hopefully, easier operations-and it has paid off in spades,” she said.

“In my time with LNG industries, we’ve seen about one in four proposals actually move forward. With about 40 receiving terminals proposed in the US, that means about 10 will actually be built, which makes sense in demand terms,” Outtrim said.


BP PLC intends to build one of those terminals at Crown Landing in New Jersey, along the Delaware River. Its formalized risk assessment includes making the carrier berths deep enough for ships to land and unload safely at all tide levels, according to Capt. Charlie O’Brien of BP Shipping.

He said that tankers also will be protected from hydraulic action from other vessels passing by as well as from excessive waves, winds, and currents. “It’s becoming standard price to use powerful tractor tugs to move vessels in and out of berths. We will have three on the Delaware River,” said O’Brien.

“LNG actually has a very good safety record. There have been about 14,000 transports without a single loss of contents,” he continued.

None of the panelists anticipate problems blending regasified imported LNG with domestically produced natural gas. “On the Gulf Coast, there are adequate processing facilities downstream,” Johnson said in an interview following the session. “There also are additional options, such as cold extraction of ethane and other heavier hydrocarbons, and nitrogen injection in the gaseous phase to reduce heat content,” he said.

Johnson said that an Omani or Angolan LNG with a high-heat content could pose problems for US transmission systems designed for leaner grades, “so extracting liquids would be a benefit, particularly since they can be sold.”

Martin, who stood nearby, added, “And it can be done at both ends.”

O’Brien pointed out that Qatar now offers two LNG grades in recognition of this potential problem. “There’s a bigger market for lean than for rich LNG,” he said.