LNG available, US access a problem

Global liquefied natural gas output is set to surge, but producers may struggle to find buyers if plans to build import terminals in the United States are hampered by environmental and security concerns, industry executives say. “Access will be key. There will be more than enough supply but will there be homes to put the gas into?” Andrew Jamieson, managing director for Nigeria LNG, said at a European gas conference last week. “The question is, can we get terminals approved in the United States? It’s a big question from my point of view.” A surge in gas prices in the United States, as local supplies fail to keep pace with demand, has reignited interest in importing liquefied natural gas, supercooled gas that is shipped by tanker. Four import terminals, which process LNG back into gas, are operating in the United States, and companies have put in applications to build about 20 new plants. This year US regulators approved plans to build two terminals, the first to be given the go-ahead in nearly two decades.

On Thursday, Exxon Mobil announced plans to build a $600 million terminal on the Texas coast to import gas from Qatar. The company said it was also looking to build plants at three other sites in the United States. Clay Harris, CEO of Tractebel LNG, agreed that obtaining permission from local authorities to build terminals was a key challenge. “Building new terminals in developed countries is not that easy. Getting local permits is not that easy. I am not sure access will stay abreast with supply,” Harris said. Belgium-based Tractebel is one of the largest LNG importers into the United States, bringing in supplies from fields in Trinidad and Tobago. Nigeria LNG, operated by Shell, had targetted the United States for sales from its expansion programme, already under way. Environmental groups have opposed terminal plans because of the potential for explosions caused accidentally or by sabotage involving an LNG tanker or facilities. A serious incident involving LNG tankers or plants would be devastating for the sector, Doug Rotenberg, president of global LNG at BP, said at the conference.

“A serious incident, whether a normal accident or terrorist incident, in the United States and the whole thing would shut down. It would have a devastating effect,” Rotenberg said. At least four countries — Britain, China, India and Mexico — are expected to start importing LNG in coming years. The number of producers is surging, with projects announced recently in eight more countries, including Angola, Norway, Peru, Venezuela and Iran.  Exxon Mobil estimated last week that world LNG production will climb fourfold to 55 billion cubic feet a day by 2020, accounting for 13 percent of the world’s gas supply. Rotenberg said another risk the market faces is that much of the new capacity won’t be ready until 2007-2009, and US prices could surge in the meantime, which would choke demand. “We could see difficult times 2005-2007 with high prices that destroy industrial and power demand,” he said. Executives said Europe could benefit if terminals in the United States are delayed or not built as excess gas could find European homes. “The biggest benefit to Europe is if projects get developed on the back of US regasification terminals that aren’t built or are delayed — that gas could come to Europe,” Tractebel‘s Harris said.