Noting it is one of the only proposed exporters not tied to domestic U.S. natural gas supplies, Oregon LNG has filed with the U.S. Department of Energy (DOE) for a permit to export liquefied natural gas (LNG) supplies to non free trade nations, saying that the proposed project at the mouth of the Columbia River will have very little, if any, impact on U.S. gas prices or the national supply-demand balance.
Contrary to critics who argue that LNG exports generally would be bad for American gas consumers, Oregon LNG’s filing cited several public benefits from the $6 billion project, such as added jobs and natural gas infrastructure in the Pacific Northwest. Oregon LNG cited a study on exports that it commissioned from Navigant Consulting, which assessed potential supply, demand and pricing impact on U.S. gas markets.
The Federal Energy Regulatory Commission said last Thursday it plans to combine the environmental assessment of the proposed LNG import-export terminal and a connecting 86-mile transmission pipeline (see Daily GPI, July 20). Oregon LNG has proposed exporting up to 9.6 million metric tons of LNG annually (1.3 Bcf/d), the majority of which would come from burgeoning new shale gas supplies being developed in British Columbia.
“The Navigant report, as well as publicly available information, indicate that North America has significant natural gas resources available at prices that are sufficient to meet projected domestic needs, [including] the [Oregon LNG] exports during the 25-year period covered in the [DOE] request,” the company said in its filing.
The proposed project was originated by project manager Peter Hansen in 2004 as the head of western development for Calpine Corp. Following the power plant developer’s subsequent Chapter 11 bankruptcy filing, Hansen led a small group of management to purchase the development rights, along with a major publicly held funding partner, Leucadia National Corp., a New York City-based diversified holding company that is bankrolling the import-export project (see Daily GPI, Dec. 20, 2007).
In the latest DOE filing, Hansen makes the point that his project is seeking export authorization for LNG produced primarily in Canada. “In this regard, the application is akin to [other U.S.] applications for authorization to export previously imported LNG, which DOE’s fossil energy division has expeditiously granted, reasoning that exporting such LNG could not significantly reduce the availability of domestically produced natural gas,” according to the Oregon LNG filing. “The same rationale applies here.”
Oregon LNG laid out its case by providing an analysis of domestic need for gas exports from both western Canada and the United States, dissecting the industrial, residential/commercial, electric generation and transportation markets in the Untied States. And it outlined the results of Navigant’s market impact study for the Oregon LNG project itself.
For supply, the Navigant study concluded that “under three scenarios completed, little effect would be seen on supply of natural gas in the United States.” They all assume the continued robust growth of unconventional gas supplies in the United States. And “the impact on U.S. demand in the three scenarios is minimal,” Navigant said.
Price impacts at Henry Hub and Sumas, WA, were considered separately. Under the Oregon LNG export case, Henry Hub prices would be $4.47/MMBtu, or about 5 cents/MMBtu greater than the base (reference) case, Oregon LNG’s filing said. The Henry Hub price under an aggregate export model (Oregon LNG, plus others) would be $4.66/MMBtu, 4.2% more than Oregon LNG’s export case. Overall, the price spread among three cases is 5.43%, Oregon LNG said.
“The price differential at Sumas is estimated to follow a similar trend,” the filing said. In 2017, prices at Sumas would vary from $4.03 to $4.26/MMBtu among the three cases.
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