The development of new liquefied natural gas (LNG) terminals in the United States will be challenged because of public misperceptions following the Sept. 11 terrorist attacks, said the head of LNG business development of Phillips Petroleum Co. on Thursday. Those unfounded perceptions led to a 20-day ban on LNG imports through the Boston harbor last October, and similar fears have led to local opposition to the reactivatation of the Cove Point terminal in Lusby, MD scheduled this year (see Daily GPI, Oct. 17, 2001; Nov. 9, 2001).

However, officials found no safety problems and LNG imports resumed, said Phillips’ Kevin Fabry, who spoke at the Ziff Energy Group conference in Houston. And with safety concerns allayed, the time is right for additional LNG expansion, he said, noting that world demand for LNG is growing at an annual rate of 10% to 120 tons/year, or 17 Bcf/d. LNG is expected to grow at least 8% a year through 2005, as new markets develop in China, India and Mexico.

What makes LNG more attractive — especially from a North American perspective — is that LNG shipments and their uses are much safer than propane or other types of liquefied petroleum gas, said Fabry. However, the LNG industry has to take those facts and do a better job of communicating the safety factor to the public.

Last year, before commodity prices dropped, the LNG announcements in North America were prolific, including an announcement by Phillips and El Paso Corp. to bring LNG supplies from the Timor Sea to the U.S. West Coast by 2005 (see Daily GPI, Aug. 23, 2001). Negotiations broke down because of delays by the Australian government, but Phillips remains committed to LNG growth. El Paso separately also announced plans last year to bring LNG supplies to North American markets by developing new import terminals in the United States, Mexico and the Bahamas (see Daily GPI, Feb. 6, 2001).

LNG use is also on the rise because costs of equipment and operations have come down and new technologies have improved efficiency. Both plants and marine tankers also have become less expensive because competition among builders has driven the costs down for both greenfield LNG plants and vessels.

Fabry said, “LNG shipping was inefficient in the past…tankers [were] going overloaded and coming back empty.” However, return trip cargoes will help cut the costs of shipping, which makes strategically located additional terminals more attractive, he said. Another factor that will drive down costs even more is in the recovery of LNG “cold,” Fabry said. He reported that the Japanese have successfully “captured” the sub-zero temperature needed for LNG, which is liquefied at -260 degrees F. This new Japanese technology, used now to freeze fish, could easily be translated for LNG use as well.

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