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Northwest Gas Execs: Region Needs New Supplies

June 9, 2008
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The Pacific Northwest needs a new infusion of natural gas supplies longer term, including liquefied natural gas (LNG) imports, according to a variety of industry speakers at the Fifth Annual Northwest Energy Conference held last Wednesday in Portland, OR, and sponsored by the Northwest Gas Association (NWGA).

Chief state regulators from Idaho, Oregon and Washington all spoke at the conference, as did the COO of Portland-based Northwest Natural Gas, Gregg Kantor. NWGA Executive Director Dan Kirschner summarized the meeting as placing more of a "sense of urgency" around the issue of climate change driving natural gas supply response in the three-state area of Idaho, Oregon and Washington.

A gas industry representative from outside the region, Australian-based Woodside Natural Gas, which is pursuing a proposed LNG receiving terminal offshore Southern California, was the most vociferous in discrediting a recent Oregon Department of Energy report that concluded LNG imports are not needed.

No one has put a specific date on when the region's two major interstate pipeline conduits from western Canada and the Rockies will become full, but the day is coming unless there are some new projects built, the association meeting speakers confirmed.

"When you stack up the peak-day demand against available capacity, you're showing a pretty efficiently used system right now," Kirschner said. "That assumes you're running the [regional pipeline grid] at 100% and nothing breaks, but, of course, those demand assumptions are sort of squishy because it is unlikely that everyone is going to have a peak at the same time.

"But it is still pretty clear to everyone that there is not a lot of extra space in the system."

A big unknown for the Northwest gas system is how much strain the increasing array of natural gas-fired generation might place on it in drier-than-normal years when then region's vast hydroelectric supplies are greatly reduced. Kirschner and the speakers all are wrestling with questions like that.

Bob Braddock, a project manager for Fort Chicago's proposed Jordan Cove LNG project and related joint venture Pacific Connector pipeline, told the meeting that 2013 is a year when the imbalance could be reached. Generally, the three most advanced LNG proposals in Oregon are targeted for bringing in imports after 2012.

"In the absence of new supply, balance will be achieved through pricing," said Braddock, predicting that the Malin, OR, basis to Henry Hub is expected to tighten and potentially go positive as one or more of the following scenarios unfold: LNG imports to the Gulf of Mexico and Eastern Seaboard increase; Rockies Express Pipeline takes more gas to Eastern markets; Northwest gas supply-demand grows tighter, and/or Sempra's Costa Azul LNG facility in North Baja California, Mexico, is expanded.

Braddock's pricing analysis came up with preliminary results that show a $250 million annual saving beginning in 2020 for regional gas consumers from the operation of the Jordan Cove LNG facility. The company's analysis concluded that Henry Hub pricing will drop by as much as 13 cents in the 2016-2020 period, causing a Sumas basis drop at the Canadian-U.S. border of 25 cents in the same five-year period. By 2020 gas consumption in Oregon and Washington will be up to 658 Bcf annually.

By the 2013 period, according to forecasts from another LNG project, NorthernStar Natural Gas's Bradwood Landing along the Columbia River in Oregon, worldwide LNG supply will be greater than demand (see related story). The global supply will go from the 24.11 Bcf/d it reached last year to 43 Bcf/d in 2014, said Joe Desmond, NorthernStar senior vice president for external affairs.

Ultimately, in response to climate change impacts, the Northwest and the rest of the nation will be looking for clean coal solutions, along with greater use of renewables and efficiency programs, but clean coal isn't an option in the Pacific Northwest because it has no potential storage areas for carbon dioxide (CO2), Desmond said. While acknowledging that on a life-cycle basis LNG is "slightly more" CO2-intensive than domestic natural gas, it nevertheless is a realistic and economic alternative for bringing in new supplies and increasing fuel reliability for the region, he said.

Longer term, Kirschner said the region's gas industry has to "keep its ear to the ground" and work closely with the region's electric industry to "make sure there are no serious curtailments."

For Kirschner the overriding message from industry representatives who spoke last Wednesday -- from within and outside the Northwest -- is that "we have to be pulling on all of the supply levers, and everything that is available we need to make sure is an option for the region. Then the market needs to make the decisions on which options are most economic."

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