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U.S. West Coast LNG Exports Problematic Amid Shifting Supply-Demand, Say Experts

The long stalled -- and final -- proposed U.S. West Coast liquefied natural gas (LNG) export project was little more than an afterthought at a regional gas conference in Denver Tuesday, where a panel of experts gave their views on the shifting supply-demand balance, which is bolstered by more takeaway capacity to Mexico and via newly opened terminals on the Gulf Coast.

Four panelists, including one from Canada, expressed different views about what was unfolding, but all agreed that the supply-demand picture will be quite different by the end of next year, not to mention the next 10 years, during the LDC Gas Forum Rockies & West conference.

"There will be changes in the direction and what will drive the natural gas market in the next 10 years," said ICF International’s Michael Sloan, a senior economist who sees a fundamental shift in demand growth ahead.

Sloan and his fellow panelists gave varying views on the relevance and chances for the proposed Jordan Cove LNG export project at Coos Bay, OR, which potentially could draw heavily from beefed up future U.S. Rockies gas supplies (see Daily GPIApril 19)..

S&P Global Platts energy analyst Thad Walker said the world market for LNG is too oversupplied to support the Jordan Cove project for the foreseeable future. "We don't think the global supplies will balance out until 2020 or 2022, so until you get to that point, it is unlikely that anyone could go forward and make an investment decision on a project like this," he said.

However, Colorado-based Andrew Browning, COO of the Consumer Energy Alliance, said there has been an unprecedented bipartisan support in his state, including the Western Slope gas producers, for the Jordan Cove project.

"I've never seen such a bipartisan effort, including the Western Slope producers, local officials, the governor and Congressional representatives, joining forces and making an all-out effort to mount support in Colorado to help the Jordan Cove project move forward," Browning said.

Sloan said he thinks the timing for the U.S. West Coast LNG exports is at least 10 years out. "I cannot seriously see something like this in today's [global LNG] market," he said.

Meanwhile, in Canada the federal government has approved the multi-billion-dollar Pacific Western LNG project in British Columbia, said Earnscliffe Strategy Group principal Charles Bird, a former Canadian government official. "This is a $11 billion facility that eventually will export 3 Bcf/d of LNG," he said.

The pipelines required to get Western Canada supplies to the export facility require another $7 billion in investment, said Bird. He estimated the full investment in the export project was around $36 billion when exploration/production investments in horizontal drilling and hydraulic fracturing over the next 30 years are also included. "There are a lot of details still to be filled in, but essentially this is the course the [Canadian] federal government has committed to.”

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