CORRECT:Shale-Gas Boom Stymies Plans For New LNG Import Terminals
03 February 2010 - 7:36AM
Dow Jones News
A surge in domestic U.S. natural-gas supplies is stalling
ambitious plans for a raft of liquefied natural-gas import
terminals along the country's coastlines.
Declining U.S. gas production in the early 2000s prompted energy
companies such as Occidental Petroleum Corp. (OXY), Sempra Energy
(SRE) and Cheniere Energy (LNG) to propose building dozens of
import terminals. The U.S. has nine such facilities, including one
in Puerto Rico, that can accept shipments from Qatar, Trinidad,
Russia and other nations of gas that's been supercooled and
concentrated for transport in ships.
In recent years, however, an influx of U.S. gas supplies from
vast, deeply buried onshore shale-rock has sharply reduced the
demand for imports of foreign gas. U.S. gas prices have tumbled
more than 60% from highs near $14 a million British thermal units
seen in the summer of 2008, making the prospect of exporting LNG to
the U.S. less compelling for overseas companies that can fetch
higher prices for their shipments elsewhere.
The Federal Energy Regulatory Commission has approved the
construction of more than two dozen new LNG terminals or expansions
of existing terminals, but most of the projects are on hold,
awaiting more favorable market conditions.
"Frankly, the outlook for these import terminals in the near
term really just doesn't look good," said Steve Johnson, president
of Waterborne Energy Inc., a Houston-based LNG research firm. "I'd
be surprised to see anything break ground here in the next couple
of years."
Occidental received FERC approval in 2005 for an LNG terminal
near Corpus Christi, Texas. Almost five years later, the Los
Angeles-based energy company has yet to begin construction of the
terminal. FERC last year approved the company's request to delay
the project's completion until April 2011.
Development of the terminal "will depend on market conditions,
including the availability of additional LNG supply," Occidental
spokesman Richard Kline said. "We cannot speculate on when that
might occur." Kline declined to provide a cost estimate for the
project.
Sempra's plans for an LNG terminal in Port Arthur, Texas, are
similarly in limbo. The project, estimated to cost $800 million to
$1.4 billion, received FERC approval in 2006. The San Diego-based
company is still trying to secure contracts for the terminal's
capacity before the company breaks ground, spokesman Art Larson
said.
"That's been the status of that particular project for a while,"
Larson said.
Some companies continue to pursue new terminals, however.
New LNG export facilities in Qatar, Yemen, Russia and Indonesia
have sent more gas cargoes into the global market, although the
U.S. remains a "market of last resort"--the destination for LNG
shipments when all other options have been exhausted. LNG flows to
the U.S. averaged 1.3 billion cubic feet a day in the fourth
quarter of 2009, up from 900 million cubic feet a day during the
fourth quarter of 2008, according to Houston energy-investment bank
Tudor Pickering Holt & Co.
Sempra's Cameron LNG terminal in Louisiana was dedicated in
October and received a shipment from Qatar in November. The
facility has an agreement with RasGas Co. Ltd., a joint venture
between state-owned Qatar Petroleum and Exxon Mobil Corp. (XOM),
for LNG deliveries through the end of the year.
Many LNG projects along the Gulf Coast are likely to be shelved
because of supplies from shale formations in the region, but
terminals proposed for the East and West coasts stand a better
chance of completion if they can overcome local opposition, said
Dean Girdis, president and founder of Downeast LNG, which aims to
build a $400 million LNG terminal in Maine. The terminal is
awaiting FERC approval.
Pipeline constraints in the Northeast and West have allowed only
limited supplies of shale gas to reach those regions, providing
some support for gas prices. But in the Gulf Coast, shale gas is
competing with LNG cargoes, driving prices lower.
Shale production has "hurt the ability to bring gas into the
Gulf Coast because of gas-on-gas competition," Girdis said.
-By Christine Buurma, Dow Jones Newswires; 212-416-2143;
christine.buurma@dowjones.com)
(TALK BACK: We invite readers to send us comments on this or
other financial news topics. Please email us at
TalkbackAmericas@dowjones.com. Readers should include their full
names, work or home addresses and telephone numbers for
verification purposes. We reserve the right to edit and publish
your comments along with your name; we reserve the right not to
publish reader comments.)
Cheniere Energy (AMEX:LNG)
Historical Stock Chart
From Mar 2024 to Apr 2024
Cheniere Energy (AMEX:LNG)
Historical Stock Chart
From Apr 2023 to Apr 2024