Pat Pope, a top official with Southern Natural Gas Co., last Tuesday said there is a strong likelihood that the U.S. is going to see far fewer liquefied natural gas (LNG) terminals built "than are being projected even today." He doesn't see any terminals being built on either the East or West coasts within the U.S. and is "quite pessimistic" about the chances of a terminal being constructed in the Bahamas.
"You have to keep in mind what gap we're trying to fill here," he told an energy policy and regulation conference in Washington, DC, sponsored by Infocast. Pope is vice president and general counsel at Southern Natural.
"We'll see the three built that are under construction," Pope said. "We'll see the four existing terminals expanded. But again, just looking at the gap that we're trying to fill, it's probably about an 8 Bcf/d gap in terms of the supply shortfall in the United States by the year 2010."
The existing terminals last year imported 1.8 Bcf/d, he noted. "That's 3% of natural flowing gas supply in the United States. They were operating at around 56% load factor. Had they operated at 100% load factor, they could have brought in 2.5 B[cf] a day."
Addressing the current four existing terminals being expanded, Pope said that "when they're built out by sometime in the year 2008, they'll be at 5.4 Bcf/d. Again, if they had a slight increase in load factor, those four terminals alone could go a significant way to filling the 8 Bcf/d supply gap."
If one assumes that the three terminals under construction are finished, "you layer that in and you're fast approaching the 8 Bcf/d target."
Pope believes that "the market will determine whether there is a need for additional terminals. Local jurisdictions will determine where those terminals will be built. My own personal opinion is none will be built on the West Coast, unless they're built in Mexico. None will be built on the East Coast, unless they're built in Canada. And at this moment in time, I'm quite pessimistic that one will be built in the Bahamas."
Meanwhile, Pope believes this summer's Energy Policy Act of 2005 falls short in certain respects. Congress "was deficient in not addressing certain lingering issues with respect to the introduction of LNG into the U.S. grid. Interchangeability -- is LNG a fungible commodity that doesn't have any particular aspects that need to be addressed before it's introduced into the interstate pipeline grid? It would have been nice to see some initiatives or at least some direction -- either congressional or regulatory -- in that regard."
Pope also has concerns about the energy law as it relates to pipeline infrastructure. "One aspect of the mandatory pre-filing program, which was codified, is that unfortunately it also applies to downstream pipelines that seek to move the LNG into the grid. Quite honestly, this will serve to slow down the development of pipeline infrastructure. It's an unfortunate consequence of the legislation."
Also, he said the energy law didn't resolve "the question regarding offshore LNG terminals -- of whether open rack vaporization will be an acceptable technology. Further study was mandated, but while that study progresses, those terminals will be dead in the water."
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