The backer of a liquefied natural gas (LNG) receiving terminal on Oregon’s Columbia River said it will cost $4/MMBtu to land LNG on the West Coast. The gas supply will be more than welcomed by the market, according to speakers at an industry conference.
“This used to be an electric region by tradition in terms of its overall energy consumption,” said Portland, OR-based energy attorney Edward Finklea, speaking at Law Seminars International conference “Buying and Selling Electric Power in the West” in Seattle. “It is not an electric region anymore. Natural gas is now on a Btu basis the dominant energy source. We now use more natural gas in the Pacific Northwest than we use electricity.”
A spokesman for NorthernStar Natural Gas’s Bradwood Landing LNG project said his project and another, along the Oregon coast at Coos Bay, were the only two viable projects, although as many as five are in some stage of development.
While Bradwood Landing has no contracts for LNG and won’t have until it obtains a permit from the Federal Energy Regulatory Commission late this year at the earliest, the company thinks gas from Alaska and other Pacific Rim areas can be brought into the Northwest for the $4 price tag, according to Tim Zenk, a Seattle-based spokesperson for NorthernStar. Assuming oil stays at $75/bbl, competing natural gas will be in the $6-8 range, according to Finklea.
Continued fuel price volatility and the current disparity between oil and natural gas prices, as well as North American gas supply shortfalls, combined with the Northwest’s growing dependence on gas-fired power generation mean the West Coast will see LNG terminals, said Finklea of the firm Cable Huston Benedict Haaagensen & Lloyd and a representative for the Northwest Natural Gas Association.
Western Canadian gas supplies are declining and larger portions of gas supply are going east. Rocky Mountain supplies also are migrating east as the interstate natural gas pipelines serving the Northwest remain full. Finklea said this and other factors promise to keep domestic natural gas prices in the $6-10 range, which will put more pressure on the market to bring in LNG.
Zenk pointed out that the Northwest already has some LNG with storage facilities in the Portland metropolitan area and along the coast at Newport, OR, operated by NW Natural, the major gas distribution utility in Oregon.
Finklea said no one can predict what will happen to oil prices, but unless they drop a lot, he sees $10 natural gas being a realistic wholesale price in the future nationally, and that equates to $100/MWh electricity in a region that is now more dependent on gas for power than ever.
“So what I see is that unless the projections are wrong, and oil is going to come back down to the $50 range, we’re headed for $10 gas, and the price of natural gas determines the price of electricity on the West Coast,” said Finklea, noting that it is easy to see why LNG is being pursued in the West.
“You don’t have new Canadian gas or Rockies gas and the electric industry is now dependent on natural gas, so the bridge is LNG.”
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