June 11, 2011

FEELING GASSY:

USA: A Net Exporter of Natural Gas? (Christopher Mims 06/09/2011, New Geography)

Despite increased demand and a push to replace coal-fired power with natural gas, the U.S. is suffering what experts call a “gas glut.”

“The real problem for shale gas is demand — they don’t know where to put all of it,” says Ben Schlesinger, an independent consultant to the natural gas industry. Meanwhile, Europe is paying two to three times the prices in the U.S., and countries that are entirely dependent on LNG, including Japan, Taiwan and South Korea, are paying even more — between $20 and $30 per million BTU.

Europe also has security and political reasons for wanting access to U.S. gas. Its current primary source, Russia, has shown a willingness to use Europe’s dependence as a bargaining chip. In three of the past five winters, Russia has cut off the supply of gas to some part of Europe in a dispute over prices and other issues.

Currently there are plans for up to three LNG export terminals on the U.S. gulf coast, and one on the Pacific coast of Canada, in Kitimat. Historically, the only LNG export facility in the U.S. was in Kenai, Alaska. LNG ships bound for Japan have departed from the terminal since the 1960s, but it’s slated to be shut down in the near future. If the first two export plants in the U.S., both converted import facilities, come online by 2015 as projected, they would be the first constructed in the U.S. in 40 years.

Whether or not the U.S. will become “the next Qatar,” which is the largest exporter of natural gas in the world, will depend on a number of factors. Together, these variables will determine whether investors think LNG export terminals are worth the risk, and whether or not the U.S. will even be capable of sending its bounty overseas.

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Posted by at June 11, 2011 8:37 PM
  

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