North America most likely will not only be relying on liquefied natural gas (LNG) for the long haul, but also eventually will compete with Asia for LNG supplies, a group of energy executives said last week on the opening day of the North American Natural Gas Summit in Houston.
Although there were differences of opinion on how much and how fast gas reserves are declining, there was agreement across the board that LNG will be a major part of North America’s supply picture going forward. The panel included Darcel L. Huse, president of Sempra Energy International, Guy Caruso, administrator of the U.S. Energy Information Administration (EIA), Matt Simmons, chairman of Simmons International and David Parker, CEO of the American Gas Association (AGA).
Hulse, whose company has a vested interest in growing LNG production in the United States (see NGI, Nov. 17), noted that Lower 48 gas production has never reached the peaks of pre-1985. “North America is unlikely to drill itself out of this situation,” Hulse said. “In the Gulf of Mexico, the gas rig count is likely to continue to decline, but how quickly? Onshore, the rig count is climbing, but for how long?”
In both conventional and unconventional plays, Hulse said producers will be “drilling like crazy” just to keep the production numbers flat. “LNG is going to be important and we will have to rely on it.”
According to Hulse, most of the North American LNG will come from the Middle East, with 28% of the reserves from Qatar, 25% from Iran and 12% from other Middle Eastern countries. And eventually, he added, Asia and North America will compete price-wise for LNG.
EIA has a more “cautious optimism” about the U.S. gas supply, said Caruso. The government agency predicts gas production will rise this year over 2002 and then taper off in 2004. However, the EIA chief noted that part of the rise in production this year will come because of the shortfall in the final quarter of 2002, which was impacted by two hurricanes.
But even though EIA’s analysts are in step with the notion that there is not enough gas production currently to keep up with demand, Caruso said that there may be more reserves than previously estimated because of new technology. “There is reason for some optimism,” he said, but “imports have really been the gap filler.”
The biggest share of LNG imports into the U.S. market are coming from Trinidad into Lake Charles, LA. And EIA estimates that in 2004, LNG imports will “almost double.” Caruso said EIA analysts “have changed our views even from one year ago on LNG. Long term, we see a substantial increase in LNG,” which he said will be seen in EIA’s next long-term forecast.
By 2010, EIA estimates there will be four new LNG import facilities, but they will “not come easy or at the price we are used to paying.” He also did not predict where the facilities would be sited.
Wood Mackenzie’s Kelly was the only analyst on the panel to disagree on the pace of LNG growth in North America. The United States simply does not yet have enough infrastructure to support a rapid growth in imports, he said. However, “step by step” beyond 2004, there will be substantial LNG growth in North America, and it will become an important part of the supply picture.
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