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The Future of Offshore Liquefied Natural Gas Policy – Is This the End?
a report by
William Whitmore
Marine Affairs Program, University of Rhode Island
In 2002, the Maritime Transportation Security Act amended the regasification overcapacity, particularly in the Gulf of Mexico.
6
In one
Deepwater Port Act of 1974 to permit the construction of offshore month alone, two shore-side terminals (Sabine Pass and Freeport
Regional Focus – The Americas
terminals designed to import liquefied natural gas (LNG). A previous LNG terminal) and one offshore terminal (Northeast Gateway) came
study by researchers at the University of New Orleans summarises online.
7
It was predicted that utilisation rates of all LNG import
offshore LNG terminal policy and analyses the political methods facilities would likely remain under 35% up to 2013 and under 60%
utilised by the George W Bush administration to create offshore LNG up to 2030.
8
Plans for other LNG terminals, including Shell’s offshore
terminal policy.
1
The study discusses how the administration Gulf Landing terminal, were abandoned.
9
centralised policy development to create an expedited approval
process. The expedited approval process was formed for several By 2008, industry experts were discussing other market uncertainties
reasons, primarily high US demand for LNG imports and an such as changing rates of demand, geopolitical issues, supply lags and
administration that was willing to co-operate with the energy increases in world energy prices.
10,11
A combination of increased
industry. This article serves as an update to that study, discussing development costs, higher natural gas prices, a slowing US economy
how the early surge to construct offshore LNG terminals has since and greater global competition for LNG led the EIA to greatly reduce
slowed, as well as how energy policies pertaining to LNG imports its 2030 LNG import prediction from 4.5 trillion cubic feet down to 2.8
may change under the Obama administration. trillion cubic feet.
12
Domestic onshore natural gas production
increased so rapidly it was anticipated that onshore gas production
While there was an initial rush to develop offshore LNG terminals, a could meet most of the US demand.
13
Development of British
slowdown quickly followed. As of February 2009, 16 offshore Petroleum’s shore-side Crown Landing
14
and Woodside’s offshore
terminals either had been reviewed or were under review by the OceanWay terminals was halted due to costs and market conditions.
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Maritime Administration (MARAD) and the US Coast Guard.
2
Out of
those 16, plans for only five terminals made it through the entire Social Resistance to Liquefied Natural Gas
process and were approved; of those five, only one terminal is Import Terminals
currently under construction, while two terminals are currently in Changing market conditions were not the only force limiting the
operation: one offshore Louisiana and one outside Boston harbour.
3
development of offshore LNG terminals; social movements opposing
A review of federal energy reports and recent industry actions both on- and offshore terminals created permitting challenges.
16–18
suggests that market volatility and increasing social and Permits for shore-side terminals were being questioned over
environmental challenges account for the decrease in offshore LNG concerns dealing with safety
19
and a desire by local leaders to look
terminal development. into regional energy plans.
20
Experts from the Government
Accountability Office reviewed a previous safety study conducted by
Liquefied Natural Gas Terminals and Imports the Sandia National Laboratory
21
and disagreed on potential
Are Subject to Market Uncertainty explosion impacts and unknowns.
22
In 2008, Congressional
In 2007, industry predictions for LNG imports were mixed. One representatives began looking to negate the Federal Energy
report
4
predicted that imports would rise due to the increasing cost Regulatory Commission’s sole permitting authority over near-shore
of domestic exploration and production. The Energy Information LNG terminals that was granted to them in the Energy Act of 2005.
23
Administration (EIA) predicted that the LNG market would be ‘tight’ These concerns pushed plans for terminal development offshore.
up to 2012, that demand for LNG imports would stimulate new While some could argue that this could account for a potential
terminal construction and that there would be a steep increase in expansion of future offshore terminal development, increases in
LNG imports.
5
Other experts expressed concern about terminal offshore production costs, market uncertainty and environmental
impacts associated with offshore terminals have proved otherwise.
William Whitmore is a doctoral student in the Marine
Affairs Program at the University of Rhode Island. He
There are a variety of environmental concerns associated with
has conducted research on a variety of topics, including offshore LNG import terminals, including impact on marine
offshore energy, aquaculture, fisheries management,
mammals, seabirds, fish and plankton entrainment and air
environmental assessment, environmental policy and
social theory. Prior to his work at the University of
quality.
1,14,16
Environmental movements protesting about the impact
Rhode Island, he was an Officer in the National
associated with open-loop regasification systems and terminals with
Oceanic and Atmospheric Administration
Commissioned Corps. He received his Masters degree
inadequate environmental impact statements have been rather
in sociology from the University of New Orleans. successful. Some companies were forced to alter their terminal
E: william.whitmore@gmail.com
design, while the development of other terminals was entirely
disapproved due to environmental impacts.
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© TOUCH BRIEFINGS 2009
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