Import? Export? Which way for LNG in North America?

Michael Giberson

Another sign of change in the North American natural gas industry, the Wall Street Journal reports Apache Corp. has agreed to supply gas to the Kitimat LNG terminal in British Columbia for export into the Asian market.  The Kitimat facility was initially conceived of as an import terminal to tap Middle Eastern and Australian LNG supplies, but with the dramatic natural gas supply shift in North America the developers reversed plans.

It seems hard to believe that Russia would sell LNG into the United States if Canadian producers could profitably export LNG to Asia, so I’m discounting that suggestion. Could it possibly be cheaper to ship gas from British Columbia into California as LNG traveling through Mexico than via overland? Perhaps if the overland pipelines become capacity constrained due to increased gas production in Wyoming and other Rocky Mountain states.

Also, a hugely expensive and risky natural gas pipeline from Alaska into central Canada or the U.S. midwest seems much less likely in a world of LNG exports from the Canada. A few years ago the project appeared essential, but now I’d say the market won’t support it for at least another 10 years.  So there is plenty of time for Alaskan state politics to work things out (and plenty of reason to think it won’t be enough time for Alaskan state politics to work things out).  The question for pipeline supporters: how long before new gas supplies, from shale and other recently developed sources, become expensive enough to justify an Alaskan gas pipeline project?

(HT to a former student, thanks David.)

ADDED, from the Financial Times Energy Source blog, a story about the natural gas industry lobby in Washington, DC:

He says senators are listening, and he has hopes they will recognise the growing role natural gas could play in the US, given how new technology has opened unconventional shale gas projects across the country, making the potential role of natural gas far larger than anyone anticipated just three years ago.

The politically useful thing that shale gas technology has done, at least from the point of view of natural gas industry lobbyists, is move several states from the “net consuming” to the “net producing” column.

About these ads

3 thoughts on “Import? Export? Which way for LNG in North America?

  1. Mike,

    Why would a country which has determined to “save the globe” from the imminent catastrophe of AGW consider increasing its use of a fossil fuel which results in the emissions of CO2, since the Supreme Court has ruled that CO2 is a “pollutant” and EPA is prepared to make an “endangerment” finding, especially if CO2 emissions must be reduced by ~2% per year?

    Why would a country which has determined that its energy future lies with high priced, intermittent sources of energy consider selling its fossil fuel resources to countries which have no demonstrated commitment to “save the globe”, so that those nations can have adequate supplies of lower cost, reliable energy with which to compete with our industries which would be forced to rely on high priced, intermittent energy?

    Enquiring minds want to know.

  2. Ed, at current natural gas prices, natural gas is capable of displacing some baseload coal fueled generation, thus putting off imminent catastrophe just a bit longer. Keeping the price of gas down helps displace more coal generation (thus saving that coal for some future in which technology renders it cleaner or unnecessary), and helps delay the really bad projected consequences. So you see, developing fossil fuel can be good for us.

    To put the point more plainly: shale gas resources + advanced drilling technology = more polar bears. (Or something like that.)

    I’ll pass on the “competitiveness” part of your question, but highly recommend Robert Rapier’s post on “Our Ironic Energy Policy” (http://i-r-squared.blogspot.com/2009/08/our-ironic-energy-policy.html).

  3. Mike,

    Additional NG pipeline capacity would take time to permit and complete. Conversion of coal plants to NG firing is not cheap, reduces efficiency and might trigger NSPS. NG equipment probably required to be displaced before end of economic life, creating dead loss. Additional NG demand would obviously affect price.

    Works technically. Economics questionable. However, if market is allowed to function, it will happen if it makes sense.

    Might be a great way to keep older, smaller coal plants operating if command and control approach to 90% mercury reductions is implemented.

Comments are closed.