With doubt continuing to grow that the United States can satisfy its natural gas growth needs in-house, liquified natural gas (LNG) importation continues to gain spotlight attention as a means to augment domestic gas supply.

According to a new study conducted by the Energy Information Administration (EIA), natural gas consumption is projected to increase from 22.5 Tcf in 2002 to 26.2 Tcf in 2010 and 31.4 Tcf by 2025, while domestic gas production is expected to increase more slowly than consumption over the forecast period, rising from 19 Tcf in 2002 to 20.5 Tcf in 2010 and 24 Tcf by 2025.

The difference between consumption and production will be made up by imports, which are projected to rise from net imports of 3.5 Tcf in 2002 to 7.2 Tcf by 2025, the EIA said in its study: Liquified Natural Gas Market: Status & Outlook.

The EIA believes that nearly all the increase in net U.S. natural gas imports from 2002 to 2010 is expected to come from LNG, with an almost 2 Tcf increase expected over 2002 levels. According to the study, net U.S. LNG imports are expected to rise from 5% of net U.S. natural gas imports in 2002 to 39% in 2010.

Because pipeline imports from Canada are expected to decline after 2010 as the country’s fields mature and dry up, the EIA believes that LNG will become the largest source of net U.S. imports by 2015. As for the U.S.’ southern neighbor, the agency believes the U.S. will continue sizeable exports to Mexico until after 2005, when the first of at least three Baja California LNG import terminals is expected to fire up.

To help make up the difference between U.S. domestic supply and demand, the EIA projected that four new LNG regasification terminals will be constructed on the Atlantic and Gulf Coasts from 2007 through 2010 to meet the 58% increase in LNG imports that is projected for that timeframe.

“The first new U.S. LNG terminal in more than 20 years is projected to open on the Gulf Coast in 2007,” EIA said in its study. “It is projected that additional terminals will be constructed to serve markets in Florida, the south Atlantic states, and the western Gulf Coast. EIA also forecasts that a terminal targeting the Florida market will be constructed in the Bahamas with the gas piped to Florida.”

The government organization noted that almost 60% of the increase in LNG imports would be served by expanded capacity at existing terminals. By 2010, EIA predicts new terminals will be collectively importing 812 Bcf annually.

The U.S. currently has four LNG import terminals with a combined total regasification capacity of more than 1,200 Bcf per year. In 2002, the United States imported 229 Bcf of LNG with more than half that volume originating in Trinidad and Tobago. For 2003, the EIA said it expects U.S. LNG imports to reach 540 Bcf.

One reason for the sharp increase in imported LNG is the fact that it is getting to be a cheaper process, lowering what was once the largest hurdle to LNG activity. Citing statistics from the Gas Technology Institute (GTI), the EIA said liquefaction costs have decreased 35 to 50% over the past ten years, with plant capital costs decreasing from more than $500 per ton of annual liquefaction capacity to less than $200 per ton for trains at existing plants (in nominal dollars). In addition, building costs for LNG tankers have decreased from about $280 million (nominal) in the mid-1980s to about $155 million in late 2003. EIA also noted that regasification terminal costs have also fallen, noting that costs tend to be site-specific and can range from $100 million to more than $2 billion.

With LNG costs going down and traditional domestic natural gas prices continuing to rise, the United States can look beyond some of its traditional LNG exporters — such as Trinidad and Tobago and Algeria, to Brunei Darussalam, Malaysia, Nigeria, Oman and Qatar and beyond — as it becomes more economic.

“World natural gas reserves are abundant, estimated at about 5,500 Tcf, or 60 times the volume of natural gas used in 2003,” the EIA said. “Much of this gas is considered ‘stranded’ because it is located in regions distant from consuming markets.”

As an example, Russia, Iran, and Qatar combined hold natural gas reserves representing more than 50% of the world total, with Russia alone having an estimated 1,680 Tcf of reserves, accounting for 30.5% of the world’s stocks.

The EIA found that the 12 countries that currently export LNG have approximately 28% of world natural gas reserves, while an additional three countries with 33% of the world’s reserves are currently building their first liquefaction facilities.

Citing an industry LNG consultant, the EIA found that the point at which transporting LNG via tanker is cheaper than transporting natural gas via pipelines occurs at a distance of around 1,250 miles for offshore pipelines and around 2,375 miles for onshore pipelines.

In 2002, 12 countries shipped 5.4 Tcf of natural gas — up from nine countries and less than 4 Tcf shipped in 1997. LNG trade accounted for about 6% of world natural gas consumption and about 26% of total international natural gas trade in 2002.

There is also a wide difference when it comes to a country’s reliance on LNG. LNG’s share of each importing country’s gas supply ranges from 2% in the United States to nearly 100% in Japan.

The EIA found that three countries in the Pacific Basin — Japan, South Korea, and Taiwan — accounted for 68% of global LNG imports in 2002. Seven European countries received 28% of global imports, while the United States imported the remaining 4%.

In addition to growth in exporting countries, importing countries also continue to multiply. In 2003, the Dominican Republic and Portugal began operating regasification terminals, while the United Kingdom, India, and China are currently building their first regasification facilities. The EIA said the Bahamas, Indonesia, Jamaica, Mexico, the Netherlands, New Zealand and the Philippines have also discussed plans for possible future LNG importing terminals.

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