Natural gas has become important in the United States. Residential demand is soaring. Half of U.S. homes use natural gas, but that number rises to 75 percent for all new homes built in the past 15 years. Also, newer homes are 25 percent larger–which means they burn more fuel.
Power plants built in the U.S. and Canada in the last five years produce about 200,000 megawatts, the equivalent of some 400 power plants, according to Cambridge Energy Research Associates. The key is that 95 percent of those are fired by natural gas.
In the future, according to Capital Energy Information Administration, demand is expected to far outstrip production. The gas required to close that gap is more than 5 trillion cubic feet–a 40 percent increase in 20 years.
Today, only 1 or 2 percent of our natural gas is supplied by foreign liquefied natural gas. (LNG). The U.S. has only five terminals capable of receiving LNG, including one in Puerto Rico. The others are in Louisiana, Georgia, Maryland and Massachusetts. Until recently, the Federal Energy Regulatory Commission had not approved a new LNG import facility since 1977. In early September, Federal regulators gave a go-ahead to develop a $700 million LNG terminal in Louisiana. Many companies are seeking federal approval for LNG terminals in the U.S. Almost 20 are on the drawing board.
Two companies are considering building LNG terminals on Canada’s east coast to help supply North American markets with gas from European, African or Middle Eastern fields. Access Northeast Energy is promoting construction of a LNG terminal at Bear Head, Nova Scotia. Irving Oil plans a $500 million LNG terminal near Saint John, New Brunswick.
All together, energy companies are planning to spend more than $100 billion in the next decade to bring gas from developing countries to rich nations, according to PFC Energy, a Washington consulting firm.
Gas-Rich Nations Three countries, Iran, Qatar, and Russia hold more than half of the world’s natural gas reserves. Russia, with the largest permanent reserves, plans to start exporting liquefied natural gas in 2007. Qatar, a monarchy near Saudi Arabia with fewer than a million people, is thought to have enough gas to supply the United States for 40 years, according to a study by Deutsche Bank.
A good example of the pressure for liquefied natural gas is a breakthrough gas deal signed by Royal Dutch/Shell Group and Total Group in Saudi Arabia. The accord is the first to allow foreign companies to explore and produce gas since the industry was nationalized in the mid-1970s.
Australia is another country in the natural gas picture. Australia’s most important export to the U.S. is rapidly becoming LNG. The latest evidence comes from Chevron/Texaco Corp. which has won preliminary approval for a $7 billion LNG facility in Australia. Indonesia is also emerging as a major source of natural gas in the U.S. market. These various LNG producers envision a rise in LNG from 0.2% of the U.S. gas supplied this year, to 11% by 2025.
Southern LNG, Inc. has awarded a $90 million contract to Chicago Bridge & Iron Co. to perform engineering, procurement and construction of an LNG terminal expansion near Savannah, Georgia.
Demand is forcing construction of LNG terminals.
A Caveat: Prudo Bay, Alaska, pumps natural gas back into their oil wells. They have enough gas to make up the shortfall in the U.S. for decades. There is talk of planning a pipeline from this northern slope of Alaska through Canada to Chicago. If built, it would be the longest pipeline ever constructed and would cost many billions of dollars, taking perhaps ten years to construct. If such a pipeline becomes reality, the long term demand for LNG is nullified. Cost and ecological concerns are against the Prudo Bay project.
Volume 30, No. 17, October 10, 2003
FOLLOW-UP COROLLARY Royal Dutch Shell is aiming to seal its position as the global leader among the LNG majors through a succession of new projects, plant expansions and purchase contacts that should help boost the firm into growing gas markets in North America, India, china, and southern Europe. Shell’s plans indicate that its equity access to LNG is set to more than double by 2007.
Some sectors are getting burned by natural gas price hikes. For fertilizer maker IMC Global Inc., not only are natural gas prices up but ammonia, a key ingredient made from gas, has climbed more than 60 percent from a year ago.
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