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El Paso Exec: Ruby, Shale Make West LNG Doubtful

With the promise of a new pipeline from the Rockies to the West Coast and ever-greater output from gas shale plays, a liquefied natural gas (LNG) terminal on the U.S. Pacific Coast is essentially dead, according to an El Paso Natural Gas executive who spoke at an energy conference in San Francisco last week.

LNG regasification capacity in the United States will reach 20 Bcf/d in two years, and only about 20% of it will be utilized at that time, said Thomas Price, vice president with El Paso Western Pipelines in Colorado Springs, CO. What he called a sea change in the energy industry over the past two years has left the nation with suddenly enough natural gas for the next 100 years, Price said.

Price is bullish on the shale gas potential -- both from a sheer supply and price standpoint -- noting that its continued development is pushing back any chance for LNG or for development of an Alaskan natural gas pipeline. He and a gas manager with Pacific Gas and Electric Co. (PG&E), Roger Graham, painted a strong picture for the long-term use of gas-fired generation throughout the West on a panel at the Law Seminars International conference, "Energy in California."

One reason that El Paso is downplaying West Coast LNG prospects may be its hopes for the proposed Ruby Pipeline, which would move 1.5 Bcf/d of Rockies natural gas from the Opal Hub in Wyoming to Malin, OR. The Federal Energy Regulatory Commission earlier this month issued a preliminary determination on nonenvironmental issues for the 675-mile, 42-inch diameter pipeline (see NGI, Sept. 7). A final certificate, which is the next step, is to be awarded to El Paso if the pipe project receives a favorable environmental review from the Commission.

In response to a question about what is meant these days by referring to natural gas as a "bridge fuel," Graham said the "bridge is now longer than I can see," and Price said he is not sure that policymakers understand the profound turnaround in domestic supplies that has taken place in the past two years. "They don't realize we have plentiful supplies now that can be produced economically," Price said. All of this virtually precludes the need for a West Coast LNG facility, he added.

Cost really is not as big a problem with unconventional gas supplies, such as the shale plays in the Rockies, as the policymakers may think, said Price, noting that it depends on the area and the producers. "In my work with the producers, I have found that the ones who first find the plays when everything is cheapest have a natural price advantage, so not all players are early and the early-comers have prices much lower than the late-comers in a particular area. Majors can have some very competitively priced supplies, compared with a smaller independent -- it is not all equal.

"I believe the technology is in place, with horizontal drilling and other things, to bring gas online well below the spot price." Given this favorable price and supply situation in the Lower 48 states, the timetable in which a version of the Alaskan gas pipeline will be economically viable keeps getting pushed back 10 or 20 years, Price said.

"From the analysis we do of the situation, the market won't support a West Coast LNG project either," said Price in response to another question. "Basically, it all goes back to there being plenty of low-cost domestic gas."

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