Gas finds hit LNG

• By TED GRIGGS
• Advocate business writer
• Published: Aug 28, 2008 - Page: 1A - UPDATED: 12:05 a.m.

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The Haynesville Shale and other massive natural gas finds have raised “big questions” about the future of liquefied natural gas in North America, and the Louisiana facilities that handle the fuel, one industry expert said.

In July, Navigant Consulting Inc. released a study that places the country’s recoverable gas reserves at as much as 2,247 trillion cubic feet, or a 118-year supply at current production levels.

“I mean that is a boatload of reserves, and if that’s the case, that just shuts down LNG tomorrow,” said David Dismukes, associate executive director of LSU’s Center for Energy Studies.

Add in recent public comments from an oil industry official that domestic LNG terminals are having trouble competing with their foreign counterparts, and it would appear there might be cause for concern.
But energy companies say they are undeterred.

The outlook for the state’s LNG industry was much different just four years ago.

Federal Reserve Bank Chairman Alan Greenspan called for a major expansion in LNG terminals, saying the fuel could help offset spiraling oil prices. Liquefied natural gas was a cheap and plentiful alternative to oil. Nigeria and other oil exporters once considered the natural gas produced along with crude a waste product and burned it off.

A Center for Energy Studies report found the state could create more than 13,000 jobs and inject more than $2.3 billion into the economy by developing an LNG infrastructure.

Then-Gov. Kathleen Blanco said the state’s economic future depended on LNG, even lobbying the federal government on behalf of Cheniere Energy Inc.’s Sabine Pass terminal.

Companies eventually filed federal and state permit applications for more than 40 LNG terminals in North America. The terminals convert the liquefied gas back into a gaseous form. Most of the proposed terminals were in the Gulf states.

Fast forward four years. In April, the Sabine Pass terminal welcomed its first LNG tanker. Since then the terminal has handled exactly zero tankers.

The reason?
Almost all of the LNG shipments are going to Europe and Japan, where natural gas fetches twice or more what it does in the United States, said Don Briggs, president of the Louisiana Oil and Gas Association. The Japanese have paid as much as $20 per thousand cubic feet; U.S. prices recently slipped to the $8 range.

Some experts have said natural gas prices in Asia could top $30 this winter. Meanwhile, the federal Energy Information Administration forecasts an average U.S. price of $10 per thousand cubic feet this year.

“That’s why we’re not getting any LNG into Cheniere,” Briggs said.