At least one knowledgeable handicapper in the liquefied natural gas (LNG) export race in the United States thinks one upcoming long shot, the Jordan Cove LNG Project along the south-central Oregon coast, may prove to be a big winner.
Calgary-based Ziff Energy Group’s Bill Gwozd is partial toward the British Columbia proposed export projects, but he also thinks the West Coast of Canada or the United States should be the winning export sites, given the significantly higher-priced Asian market for LNG that only the western locations can take advantage of economically.
Pursued by a group headed by Fort Chicago Energy Partners for a half-dozen years and holding a conditioned approval for an LNG import facility and connecting 230-mile transmission pipeline, Jordan Cove entered the export sector only recently and won some preliminary approval for exporting to designated favored nations from the U.S. Department of Energy (DOE). Nevertheless, the project is doing its due diligence and may end up succeeding as an export facility at Coos Bay, OR, Gwozd said.
“Although they are labeled as a ‘late-comer,’ they are not late, they are just doing the due diligence,” said Gwozd, adding that too many of the current U.S. LNG export proposals have not been well thought out from an economics and global energy market standpoint. “If you have to do real estate and buy a chunk of land, you always look for the best location. They [Jordan Cove] originally were going to bring gas in, and then they did the due diligence and realized that wouldn’t work, so they decided maybe they could reverse things and become an export facility.
“If we can’t beat them, maybe we can join them, the Jordan Cove people decided. So they have turned that project around, piggy backing on the outlook for Kitimat in British Columbia [see Daily GPI, Sept. 23, 2008].”
In a first step to gaining broader approvals, Jordan Cove in December gained an initial approval from the DOE to export LNG. The backers of the project at Coos Bay called it a “procedural” step needed to seek broader DOE and Federal Energy Regulatory Commission approvals. Jordan Cove applied to DOE last September for authorization to export up to 438 Bcfe of LNG annually. In October the state of Oregon filed a protest to the DOE application, but the federal agency dismissed the state’s arguments (see Daily GPI, Dec. 9, 2011).
“In my opinion, it will be the first U.S. area to build an LNG export terminal from scratch,” Gwozd said. “Hypothetically, if they get all the stars to align, they could be flowing gas in 2017.” He reminds listeners that when one talks about stars aligning, at one time there were predictions for Alaskan North Slope gas flowing in 2003, and everyone is still waiting to see if that can happen now before 2020.
“Things can be delayed not only by years, but by decades,” Gwozd said. “One of the keys for U.S. gas exports is not how much gas we have now, but what sort of supplies will we have 25 years from now?
“I use 25 years for a very specific reason. Assume it take five years go get the export facility up and running, so say hypothetically that Jordan Cove is successful. That means it is up and running by 2017, and then let’s assume a 20-year life for the facility, meaning it is running until 2037, so the project needs to undertake a supply/demand balance for North America to ensure that the people in North America have adequate gas supplies for the 20 years after 2017, so it is a 25-year supply/demand outlook.”
Therefore, the due diligence that Jordan Cove needs to complete is a supply/demand analysis covering the next 25 years, Gwozd said. “So they need to go back to the regulators and scrutinize the overall proposal to make sure nobody freezes in the dark.” Making sure North America has adequate supplies with prospective exports is very important, he reiterated several times during a recent interview with NGI.
By Gwozd’s estimates at Ziff Energy there could be up to 9 or 10 Bcf/d of exports if all the current applications are approved and run at full capacity.
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