Widespread development of natural gas export capability in the United States could be a huge boost to the U.S. economy, to natural gas infrastructure companies and to liquefied natural gas (LNG) import facilities that now are stymied by a disjointed global market for gas that currently has U.S. prices lagging way below those in the rest of the world, according to Darcel Hulse, Sempra Energy’s outgoing CEO for LNG operations.

With a long-ago announced retirement beckoning him Jan. 1, Hulse talked Tuesday with NGI about where the LNG sector in the United States now sits and where it might go with the current rising number of proposals to develop LNG export facilities in North America, mostly at existing import installations such as Freeport LNG in Texas and Cheniere Energy’s Sabine Pass facility in Cameron Parish, LA (see Daily GPI, Dec. 14).

With more than 40 years experience in the industry, Hulse’s assessment is that exports are a way for the U.S. economy and national interests to be bolstered at the same time more value is obtained for the newly burgeoning national resources — shale gas, liquids and oil. He is particularly bullish about the development of “brownfield” gas liquefaction facilities at existing LNG terminals, of which Sempra Energy has two (Cameron in Louisiana and Energia Costa Azul in North Baja California, Mexico).

“When you have a brownfield in a key location, you have an economic advantage and you have taken a good portion of the risk out of the project,” said Hulse, adding that he thinks Sempra is in a good position to be successful regardless of what the global market eventually does. He considers being on the Gulf of Mexico (GOM) and along the West Coast of Mexico as ideal export locations with marine docking facilities and storage tanks already in place.

“You’ve already constructed a lot of the facilities that take a lot of manpower during construction, so for that part of the project the risk has been removed.

“On the liquefaction side, you have much larger components, you order them in advance, you know the prices of the equipment, you install them and then in effect hook them up, so your man-hours to the total cost are much lower than if you were still building tanks and marine facilities.”

Hulse said in the brownfield sites exporters will be receiving pipeline-quality gas that has already been treated and stripped of its liquids.

He acknowledges that Sempra’s strategy for LNG development has been turned upside down in recent years. It was originally based on North American gas reserves continuing to dwindle and the need for imports to grow. Shale gas has changed all that.

“Shale formations and the technology to get at the gas changed the picture dramatically,” Hulse said. “So now we see the three major [LNG] markets globally — Europe, Asia and the U.S. — just really disconnected in terms of prices.” He called it a “unique market situation” unlike any other major commodity in the world currently.

Hulse traces the start of the wide disparity in gas prices between the United States and elsewhere to the first quarter of 2010. “Since then it has gotten really wide, so the question is how will that market be moving forward? Will it remain disconnected, or will it eventually come together again? That is anybody’s guess.”

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