The possibility that LNG exporting countries might someday attempt to operate a cartel similar to the Organization of Petroleum Exporting Countries (OPEC) in an attempt to control world gas prices and production appears to be a real threat to officials at the American Public Gas Association (APGA).

“We’re very concerned about it. It seems like we’re going the way of oil and OPEC,” said David Schryver, vice president for congressional affairs at APGA. “We don’t want other countries setting a price for us, particularly when we have sufficient gas at home that’s being kept off limits.”

News that some of the world’s leading liquefied natural gas (LNG) exporters got together in Trinidad last week sparked the APGA reaction.

Trinidad Energy Minister Eric Williams said officials Trinidad, Iran, Algeria, Malaysia, Brunei, Lybia, Egypt, Bolivia, Indonesia, Venezuela, Oman, Nigeria, Qatar and the United Arab Emirates, who are members of the four-year-old Gas Exporting Countries Forum, were sharing market intelligence and production data at a meeting in Trinidad’s capital on Wednesday.

APGA, which represents municipal and public gas utility systems across the United States, has sent letters in recent weeks to Federal Reserve Chairman Alan Greenspan, President Bush and administration officials urging them to advocate opening areas where oil and gas drilling currently is off limits rather than focusing on importing more LNG (see Daily GPI, April 13).

“Certainly LNG needs to be a component of any energy policy, but when you increase percentages significantly more than where they are currently I think we’re just setting ourselves up for more dependence on foreign fuel and decreasing our domestic energy security,” said Schryver. “We think it’s a real threat.”

LNG is a rapidly growing source of U.S. energy supply. U.S. LNG imports soared 29% last year to 652 Bcf. Trinidad made up 71% of the total. While LNG still only makes up about 3% of total U.S. demand, the Department of Energy is expecting LNG imports to grow another 12% this year to 730 Bcf, and make up more than 20% of total U.S. gas supply by 2025, with imports of 6.4 Tcf.

Schryver said that APGA believes that once LNG reaches 15% of total gas supply in the United States, foreign countries will have the ability to significantly increase U.S. natural gas prices. “We should reach that within 20 years. It may happen quicker than people think because as our domestic supply continues to decrease. We are going to have to rely on LNG more and more.

“We’ve been pushing for opening up drilling areas that are currently off limits, looking at the eastern Gulf, off in the Atlantic, off in the Pacific, increasing research into technology that will allow us to get natural gas from methane hydrates. We believe our focus should be on increasing domestic supply.”

Some experts say consumers really have very little to worry about because an OPEC-like cartel simply won’t work with LNG. The supply is fragmented among too many countries and LNG is a very tiny percentage of world gas, while OPEC controls a very large percentage of the world’s oil market, Poten & Partners’ Gordon Shearer told NGI. Further inhibiting market control, most LNG is sold under long term contracts, there is not a liquid market in LNG tankers and transportation makes up too much of the price of delivered LNG (see Daily GPI, April 29).

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