LNG Digest: Sample
Articles
(Appeared
January, 2007)
On
Careful Scrutiny...
U.S. LNG TRADE IS EXPECTED TO ACCELERATE
According to the U.S. Energy Information Administration (EIA),
the U.S. economy is expected to accelerate LNG imports over
the coming two years, after two years of decline. The expansion
of LNG imports this year and next will result from supply
expansion, including up to three new countries joining the
list of global exporters. The EIA forecasts year-on-year increases
in U.S. imports of 34.5% and 38.5% for this year and 2008
respectively.
In the coming year, imports are expected to approximate 770
BCF as exports from Nigeria and Trinidad increase with the
availability of more feedstock gas. “Additionally, a
greater portion of current exports from Nigeria and Trinidad
and Tobago are expected to come to the U.S. as world prices
adjust to lower demand growth in LNG in Asian and western
European countries,” the EIA said in a short-term energy
outlook supplement.
By the end of 2008, exports from three new countries, Equatorial
Guinea, Norway and Yemen, are also expected to begin. Equatorial
Guinea is expected to become the world’s 14th LNG exporting
country during the coming year. By the end of last year the
Marathon Oil-led project on Bioko Island was 85% complete,
the EIA said.
BG Group has contracted supplies from the one-train facility
and focused on the U.S. as a market. The administration expects
further growth in U.S. LNG imports in 2008, with the arrival
of supplies from Norway’s Sn?hvit project. Statoil has
contracted capacity at the Cove Point import terminal in Maryland.
New supplies are also expected to arrive from Yemen by late
2008, with the U.S. again expected to be one of the principal
target markets. However, the Total-led project near Al Mukalla
is not expecting full operations until early 2009.
Finally, the Sakhalin II project in Russia is scheduled to
begin operations next year, although supplies from this project
are not likely to enter the U.S. directly in the next two
years. Mexico may import LNG from Sakhalin II through the
Costa Azul terminal in Baja California. The terminal’s
owners have chosen U.S. markets as a final destination for
this gas through a pipeline.
With this increased availability of LNG, the EIA expects U.S.
imports to reach 1.08 TCF in 2008.
This marks a sharp departure from the experience of the past
two years when the U.S. had been priced out of the market.
Recent competition for LNG cargoes from buyers in western
Europe and Asia has resulted in prices exceeding the corresponding
natural gas market price in the U.S.
“During periods of high global LNG demand and rising
prices, LNG cargoes will continue to be diverted to countries
that are more willing to pay the highest prices,” the
EIA observes. “However, increasing global LNG supplies
will ease price pressure in the world market over time, and
as a result the U.S. is likely to attract a greater share
of available LNG cargoes.”
|
Deliverability and Storage in U.S. Terminals |
| LNG
Terminal |
Deliverability
MMCF/D
Year-end 2006 |
Deliverability
MMCF/D
Year-end 2008 |
Storage
Capacity
BCF
Year-end 2008 |
| Existing |
|
|
|
| Cove Point, MD |
1,000 |
1,800 |
14.5 |
Everett, MA
|
725 |
725 |
3.5 |
| Elba Island, GA |
1,200 |
1,200 |
7.3 |
| Lake Charles |
1,800 |
1,800 |
9.2 |
| Gulf Gateway |
500 |
500 |
0 |
| New |
|
|
|
| Freeport LNG |
0 |
1,500 |
6.9 |
| Sabine Pass |
0 |
2,600 |
10.2 |
| Cameron LNG |
0 |
1,500 |
10.2 |
Source: EIA/Short-Term Energy Outlook Supplement-January
2007
The brighter outlook for supplies of LNG from
traditional and newer sources is fortuitous in that the U.S.
is facing potentially serious supply shortages of crude and
refined products. Many energy observers believe that the world
has either passed, or is about to enter, an inflection period
of “peak oil” and that the major industrial economies
of the world will have to scramble for limited supplies of
energy at ever-higher prices.
Compounding the international stress is the emergence of China
and India with their burgeoning economies that require massive,
incremental inputs of energy to attain ambitious national
goals. Despite all the talk of these two economies slowing
from super-charged rates, the reality is that even if both
slowed by half, they would still exert inordinate strain on
a very fragile international equilibrium.
Over the coming 5-10 years, it is likely that LNG will occupy
a more prominent role in balancing demand/supply equations
in many of the industrialized countries of the world. The
U.S., which has witnessed external pressure on LNG supply
from unusual circumstances abroad, is virtually certain to
enjoy a long period of rising activity, which may result in
it becoming the largest global importer of LNG by 2015.
Receding Nuclear Demand Aids LNG
Nuclear power’s share of global power supply is likely
to shrink over the next few decades as political indecision
and public opposition limit its growth. Even industry optimists
do not see a significant expansion in nuclear power’s
share of electricity production over the next few decades,
despite governments warming to it as fears over climate change
and security of imported energy supply intensify.
“In relative shares, in most projections out to 2030
nuclear power is going to decline,” Hans-Holger Rogner,
head of nuclear energy planning at the International Atomic
Energy Agency, said.
The IAEA expects nuclear power to produce 12%-13% of global
electricity by 2030, down from the current 16%, while the
International Energy Agency forecasts 10%-14%. But Rogner
said that long construction lead-times, planning complexities,
shortages of trained nuclear engineers and residual public
apprehension all mitigated against progress in the nuclear
energy industry.
“Even if there is a momentum of rising expectations
for nuclear power, it will take time to propagate to the system,”
Rogner said. “Many countries, even nuclear countries,
have lost the capability. They don’t have the licensing
authorities in place any more, and they have to re-educate
their people.”
The IAEA forecasts an increase in nuclear generation capacity
of 20%-30% by 2030, but overall electricity generation capacity
is going to double in that period. With most of that incremental
demand met by coal, renewables and gas-fired plants, nuclear
is likely to lose market share.
Beyond 2030 is extremely difficult to predict because of the
uncertainty of whether fears over climate change will override
the fear of nuclear power that still lingers 20 years after
the Chernobyl nuclear disaster and the near-miss at Three
Mile Island. The recent incident at Indian Point in New York
state, with a large escape of radioactive water, will certainly
not help the nuclear industry’s cause.
“One accident could set everything back,” Rogner
said. “If we have a little bit more climate catastrophe
it may just go the other direction.”
If there is a shift towards nuclear over the next few decades,
amid accelerating climate change and diminishing fossil fuel
reserves, nuclear may gain market share, but not until the
middle of the century and beyond.
The global response to climate change, together with soaring
oil and gas prices, has helped nuclear power emerge from the
shadow cast by Chernobyl. But growing political discussion
in the developed world about the benefits of the technology
has yet to result in large-scale nuclear construction programs,
while Europe’s aging, state-built reactors operate at
the edge of life expectancy.
“Is it just lip service that our politicians pay or
do they really mean it?” Rogner said. “That will
make a difference over the next 20 to 30 years.”
Because of the costs involved in building new nuclear plants
and disposing of the waste, private companies demand investment
security from governments, particularly a long-term, global
penalty on carbon emissions. There is no sign of that yet.
Even where there is a penalty for carbon emissions, potential
investors in new European reactors are reluctant to commit
to new nuclear construction, because Europe’s CO2 trading
scheme currently ends in 2012.
“It’s hard to see private industry investing in
nuclear power stations without guarantees from government,
not only for carbon but also for waste disposal and decommissioning,”
Andrew Nind of Poyry Energy Consulting said.
Nind said that increasingly liberalized markets of Europe
discourage new nuclear construction, but that growing environmental
concerns might force governments to assume enough of the risks
involved to encourage private industry to build.
“A lot will depend on the weather and the political
will to do something about global warming,” he said.
|
Nuclear Capacity and Percentage Share in
Electricity Generation |
|
Region |
Nuclear Capacity
(GW) |
Share of Nuclear in
Electricity Generation (%)
|
| |
2005 |
2030 |
2005 |
2030 |
| OECD |
308 |
296 |
22% |
16% |
| OECD North America |
112
|
128 |
18 |
15 |
| OECD Europe |
131 |
74 |
28 |
12 |
| OECD Pacific |
65
|
94 |
25 |
32 |
| Transition Economies |
40
|
54 |
17 |
18 |
| Developing Countries |
19 |
66 |
2
|
3 |
| China |
6 |
31 |
2 |
3 |
| India |
3 |
19 |
2 |
6 |
| Other Asia |
5 |
10 |
4 |
3 |
| Latin America |
3 |
4 |
2 |
2 |
| Middle East and Africa |
2 |
3 |
1 |
1 |
| World |
368 |
416 |
15 |
10 |
Obviously, LNG will become one of the most immediate
beneficiaries of the receding share of supply that awaits
the nuclear industry. A greater percentage of power is being
generated by natural gas as a result of a growing groundswell
of demand that was created by fears of noxious emissions and
atmospheric warming from oil and coal. Natural gas is the
least onerous of the traditional fuels supplying power plants
and fuel for power generation is one of the fastest growing
areas of the energy sector.
|