As a result of higher U.S. natural gas prices and various technological breakthroughs within the industry, liquefied natural gas (LNG) is expected to play an increasingly important role in the gas industry and energy markets in the next several years, according to the Energy Information Administration (EIA).

In a new EIA report “U.S. LNG Markets and Uses” the government agency noted that rising gas prices teamed with technological advances that have lowered costs for liquefaction and regasifying, shipping, and storing LNG, has “rekindled” LNG interest.

In addition to expansion plans at the four existing LNG import facilities in the Lower 48 States, the EIA said “Companies have announced plans for the construction of over a dozen LNG import facilities to serve U.S. markets since the beginning of 2001, although it is not yet clear how many will be built. LNG storage facilities will also continue to be important in meeting peak demand needs of local utilities and as a way to store gas until needed.”

In addition to LNG’s most common uses, the EIA pointed out that LNG has several niche markets including vehicular fuel and as an alternative to propane for facilities off the pipeline grid. The agency noted these niche markets demand gas in the form of LNG whether from domestic or foreign sources.

The EIA said LNG’s future developments in regard to its role in the U.S. energy industry will likely depend in part on the public’s perception of the need for additional natural gas supplies and on LNG’s safety and reliability. The administration noted that to date, LNG facilities throughout the world have generally had an excellent safety record.

To further fortify the nation’s harbor security, Congress in late 2002 enacted The Maritime Transportation Security Act of 2002 (S. 1214), which expands the Coast Guard’s role in providing port security concerning a variety of maritime activities, including tanker transportation.

Noting that LNG history has been that of both periods of “high growth” and “prolonged downturns,” the EIA said most of the country’s facilities were constructed between 1965-1975, and are dedicated to meeting the storage needs of local utilities. Including marine terminals, storage facilities, and operations involved in niche markets such as LNG vehicular fuel, there are at least 113 active LNG facilities in the United States, according to the EIA. The agency added that approximately 55 local utilities own and operate LNG plants as part of their distribution networks.

The EIA calculated that if converted to the natural gas equivalent in cubic feet, LNG imports totaled 238.1 Bcfe in 2001 and exports totaled 66.1 Bcfe. A similar conversion for the amount of LNG storage additions in 2001 (excluding LNG at marine terminals) was about 42.6 Bcf in 2001. Going off of a rough estimate, the agency said annual LNG production for use in the niche markets is about 5 Bcfe.

LNG imports in 2001 increased by 14.4 Bcf or 6.4% from the previous year. “This increase lifted LNG import activity near its historic high in 1979, when 252.6 Bcf was received from Algeria,” the EIA said.

During 2001, 101 tankers arrived at U.S. marine terminals. Distrigas’ and Tractebel’s Everett, MA marine terminal received 39 cargoes (a decline of 6 cargoes from the 45 cargoes received in 2000), while CMS Trunkline LNG’s Lake Charles, LA facility received a record 61 cargoes (compared with 56 cargoes in 2000). El Paso’s and Southern’s Elba Island terminal, which reopened in November 2001, received one cargo that had been diverted from Everett following the September 11 attacks.

“Developments in LNG trade throughout the world match or exceed the trend of rising LNG imports to the United States,” the EIA said in its report. “Both supply and demand are driving plans for expansion of existing facilities and the construction of new facilities.” The agency noted that the supply side is interested in finding a market for 2,755 to 3,350 Tcf of stranded natural gas worldwide.

EIA’s research shows that recent LNG proposals include at least five terminals to serve the California markets, a floating semi-mobile offshore facility to be located in the Gulf of Mexico but which could be moved to other locations depending on market conditions, and three terminals to be constructed in the Bahamas (to serve the Florida market via undersea pipelines).

“The renewed interest in LNG, particularly in terms of the proposals for new construction, also reflects more long-term issues and concerns,” the agency said. “Long-term gas market projections show a significant increase in the use of natural gas to meet energy needs through 2025. Imports of LNG are seen by supporters as a way to address the concern over the ability of domestic supplies and pipeline imports to meet the projected increase in demand.”

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