US seen turning abroad to feed natgas appetite
Date: 14-Feb-03
Country: USA
Author: Matt Daily
That demand has been fed by the large numbers of power plants built in the past three years that are completely reliant on natural gas, forcing the United States to turn to many of the same exporters that control trade in the global oil market.
"We in North America consume about one-third of the gas used everyday in the world, but we have less than 2 percent of the reserves," Hal Kvisle, chief executive of TransCanada PipeLines Ltd. (TRP.TO), told a Houston energy conference.
That supply deficit will sharply raise the profile of liquefied natural gas, which has been on the market for about 30 years but remains a niche market because of its relatively high costs compared to shipping the fuel through pipelines. Putting LNG on ships is the only viable means of transporting gas the long distances across oceans.
"Ten years ago, gas was very much a regional and local market," said Philippe van Marcke, president of energy marketing for Belgium's Tractebel SA , the energy unit of French conglomerate Suez (LYOE.PA) and a leader in LNG marketing.
"Tomorrow, the natural gas market will be a global market. linked by LNG," he added.
About 70 percent of the proven gas supply is in the Middle East and Russia. Norway and North Africa also have significant supplies, Van Marcke said,
Gas demand in North America is likely to rise by 50 percent in the next two decades, reaching 33 trillion cubic feet annually in 2020 from about 22 trillion currently, according to Mike Warren, chief executive of gas producer and distributor Energen Corp. (EGN.N)
"As much as nine trillion cubic feet of that may have to come from Alaska and LNG," he said.
RUNNING TO STAND STILL
Heavy investments to get output from gas fields such as Canada's Mackenzie Delta and Alaska's Prudhoe Bay are expected to contribute new supplies as early as the middle of the decade, but those fields will largely take up slack as key fields in western Canada and the Gulf of Mexico see volumes drop.
The western Canadian fields are a key source of gas for North America, but have been showing annual decline rates of more than 20 percent.
"The bulk of U.S. supply will continue to come from western Canada and the Gulf Coast," said Kvisle, but LNG volumes are likely to reach 5-10 billion cubic feet per day by 2015, more than 10 percent of the projected North American demand.
LNG faces several hurdles, since few municipalities in the United States are willing to shoulder the environmental burden posed by the large industrial sites needed to turn the liquefied product into a gas that can be burned in factories and houses.
Only four LNG facilities are currently operating in the United States, two on the East Coast and two on the Gulf Coast. Expansions planned at those sites would lift their capacities by about 40 percent by 2020, amounting to 1.4 trillion cubic feet per year, less than 4 percent of projected total U.S. gas demand.
GAS COMPETITION
Making gas into an international commodity will alter the industry to look more like the crude oil market, pitting North American demand against the fast-growing gas markets in Europe and Asia.
LNG already has a foothold in Europe, although pipelines connecting the continent to Russian and Norwegian gas fields have made it a less viable alternative there. That scenario will change in 2005 or 2006 when the United Kingdom is expected to turn from a gas exporter to a net importer, siphoning off excess supplies from the market.
That will not help prices in the U.S. market, which have surged this year as the slightly colder-than-normal winter on the East Coast tapped gas storage levels.
"LNG will play a long-term role in Europe as well, but in North America, we don't have a choice," Van Marcke said. "We do believe it's a fait d'accompli."
