The role of liquefied natural gas (LNG) will play an ever bigger role for the United States, with imports surpassing more than 8% of total domestic supply by 2010, according to industry experts speaking Tuesday at GasMart/Power 2003 in New Orleans.

“We see a picture of a big gap looming out there,” said Greg Jenkins, president of El Paso Global Petroleum and LNG. “In our view, we believe it will be quite close to 8.5% served by LNG in 2010. It will be a significant increase from today.”

Matt Snyder, managing consultant of Global Gas for Wood Mackenzie, agreed. Snyder, who is based in Boston for the global consultant, focuses on LNG research. He noted that while the Pacific market now dominates LNG sales, the Atlantic Basin is growing to serve a constrained domestic market.

However, Snyder and Jenkins believe several issues will allow only a few of the many LNG projects to move forward. El Paso estimates there is 23 Bcf/d in projects planned, which mirrors Wood Mackenzie research. However, both agreed that security issues, as well as the inability of producers to agree to long-term contracts, will hinder many projects from being completed.

Until more terminals are approved and actually completed, Jenkins said, “most projects won’t go forward.” But a bigger concern is security restrictions and what he termed “strong resistance,” which proved to lower actual LNG imports into the United States last year, he said. But, he added, “under any scenario, there is a significant amount of LNG that eventually will make it to this market.”

To avoid many of the land-based issues involved with LNG terminal siting, El Paso is moving forward on its Energy Bridge system, an offshore loading and regasification buoy that would pipe natural gas into the United States. The first Energy Bridge will be located in the Gulf of Mexico, about 116 miles off the coast of Louisiana, and it is one of five LNG facilities El Paso plans to install offshore (see Daily GPI, Dec. 24, 2002). Similar successful systems already operate in the North Sea, he said.

“Demand associated with new gas, that’s our driver,” Jenkins said. “Traditional sources are not making it.”

According to Wood Mackenzie research, as LNG costs have decreased, “stranded reserves now look better than ever,” said Snyder. He noted that there was an “absolute abundance” of gas globally, but moving the land-locked reserves to market has proved a problem, which will continue. “There’s a substantial price risk,” Snyder said, because LNG trains initially cost $3-$4 billion.

Although the domestic market needs the gas, Snyder foresees continuing problems with terminaling the imports. With only four LNG terminals now in the United States, he said there are “limits and facility constraints” going forward. Also, without more long-term agreements from producers, some LNG importers could pass up the U.S. market for more lucrative deals in Asia and Europe.

“There are a number of issues that have to sort themselves out,” said Snyder. “It’s still quite limited.” Existing LNG regasification facilities are now being expanded, but Wood Mackenzie research has found that overall, U.S. terminals will require a “massive rebuild” because of the difficulty of bringing large supplies to market.

“They have to be underpinned by long-term contracts,” Snyder noted. In the United States, “LNG can grow from 1 Bcf/d currently to 5.8 Bcf/d by 2010, but four to five facilities will have to be constructed. We absolutely need new terminal capacity, but new liquefaction facilities will be constructed only where new supplies are contracted.”

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