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The LNG Renaissance, Flattening the World - LNG Review 2005
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David M Sweet
Director, Special Projects,United States Energy Association
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Originally printed in:
LNG Review
- 2005
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The recent best-seller The World is Flat focuses on numerous examples of how information technology is connecting the far corners of the world and bringing us all closer together. Advancements in LNG technology – which have brought down costs while market prices for natural gas have risen to unprecedented levels – has had a similar flattening effect.
The first oil well drilled in the US by Colonel Drake in 1859, which was 21m deep, cost more per unit produced than the wells of today, which go under 3.2km of water, 6.4km of rock and 9.7km horizontally. With the now available, more efficient technology throughout the LNG value chain, significant quantities of new LNG have, in effect, been ‘discovered’, making the LNG option competitive with other indigenous sources of gas.
Today, LNG accounts for a relatively small component of the total North American supply picture, but this is predicted to rise dramatically, to over one-fourth of total supply, as existing import terminals are expanded and new ones come on-line. The confluence of the emerging trends of increased demand for natural gas, declining production from mature indigenous supply basins and declining costs along the LNG value chain has given rise to the renaissance of LNG.
The manifestation of this LNG renaissance has been a flurry of proposals to build receiving terminals along the shores and record levels of imports in 2003 and 2004, with supplies into North America coming from seven countries.
There are signs that the talk about LNG is beginning to match the reality. The first new US terminal in over 20 years went into operation in March 2005. Excelerate’s Energy Bridge was the first to cross the finish line, mainly because its submerged turret loading (STL) technology was able to overcome ‘not in my backyard’ concerns by keeping the terminal out of sight and out of mind. The energy legislation passed this summer by the US Congress and signed by President George Bush will help streamline the permitting and review process for LNG terminals and should facilitate additions to the US capacity to receive LNG.
As LNG infrastructure advances globally, both in terms of the supply side and receiving terminals, the options for trade will multiply and the world will continue to flatten. As a result, the natural gas markets in North America, Asia and Europe are starting to become interconnected in new ways that will change the face of the energy trade. A cargo of Russian LNG recently made its way to the US shore and in the not too distant future, LNG from Sakhalin, Russia, is likely to enter the US market via Mexico. Moreover, just as the recent storms in the US – Katrina and Rita – have jolted energy prices here and abroad, the lack of storms and rain in Europe this summer had implications for the price and availability of LNG cargoes for the US.
Categories:
Overview & Strategy
,
LNG
,
Gas Processing
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David M Sweet is Director of Special
Projects for the United States
Energy Association (USEA). With
almost 25 years of broad energy
policy, commercial and technical
experience he brings substantial
depth to the USEA team. He started
in the natural gas industry at the
Federal Energy Regulatory
Commission as a Technical Analyst
on various unique pipeline
construction and service proposals,
including proposals for LNG facilities
and service, and as an expert
witness on financial and rate issues
concerning natural gas and oil
pipelines. Previously, Mr Sweet was
Vice-President of the Independent
Petroleum Association of America,
where he directed natural gas,
electricity and legal policy efforts
and served as legal counsel to the
Natural Gas Council. Mr Sweet serves
as the US representative to the
International Gas Union (IGU) on
LNG, President of the Natural Gas
Roundtable, co-Chair of the LNG
Subcommittee of the Alliance for
Energy & Economic Growth, member
of the Natural Gas Steering
Committee, member of the North
American Energy Standards Board,
Vice-Chairman of the ABA Section of
Public Utility, Communications and
Transportation Law and its gas
committee, member of the World
Energy Council committee on
Cleaner Fossil Fuel Systems, on the
Board of Advisors of the Institute
for the Analysis of Global Security
and as Education Chairman
for GasWeek. He received his law
degree with honours from
the George Washington University
and an MBA and a BS degree
magna cum laude from the University
of Maryland.
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