EnergyBiz - November/December 2007 - (Page 38)

new Quick Technology Consider the Northeast Gateway off the shores of Boston, which is expected to be operational by winter: Tankers serve to deliver and re-gasify the LNG, with no part of the process actually done on shore. The gas is then transported using a buoy system that is hooked into flexible pipes. Those lines will run under the ocean floor and across the Massachusetts Bay before they connect directly to the New England Grid. Excelerate Energy, which owns the “midstream” project, has committed to using new technologies and procedures on its vessels that will minimize air emissions and improve water quality. As such, it was able to win relatively quickly federal and state permits. “We have a technology we can apply quickly and to other natural gas markets that other LNG providers may not be able to serve,” says Excelerate Energy CEO Rob Bryngelson. “We are offshore. Through our dockside technology, we can build a gas port in about a third of the time and at substantially less cost than a traditional facility. Each ship is a floating re-gasification terminal with the flexibility to move cargo around the world.” Besides Boston, it also has a facility in Northern England, South America and the Middle East. The goal is to build a global portfolio of LNG facilities and to have as many pricing points as possible. If any one location starts seeing high natural gas prices, Byrngelson says that the company is agile and well positioned to take advantage of it. The United States, in fact, will be bidding for limited resources with other nations. Currently, korea and Japan are the top importers of LNG with this country in third. france and Spain are next in line. And with the economies of China and India expected to blossom, they will require ever-increasing amounts of LNG in the future. Bearish analysts warn that those who need the LNG the most will pay more. In essence, those with the LNG supplies will direct their ships to head where they can get the highest price. More than likely, that will be to regions such as Asia where the price of LNG is tied to oil indexes, and not where it is tied to natural gas indexes, as it is in the United States. While the future prices of those two commodities will often move in unison, oil is now comparatively more expensive. The implication is that producers will earn greater profits by selling to Japan, China and India. By extension, terminals in this country would be underutilized and underperforming. “If a particular market has a real need for it and it is willing to pay a higher price, then it will draw supply away from the United States,” says Jay kelly, partner with vinson & Elkins’ energy practice in Houston. “The LNG industry is not a ‘field of dreams’ whereby if you build it, they will come.” suppliers challenged by demand The LNG industry has doubled in size since the middle of the 1990s while the number of exporting countries during that time frame has increased from 8 to 13, according to the energy consultancy of Wood Mckenzie. Oman, Nigeria, Qatar and Trinidad emerged as new suppliers in the mid-to-late 1990s and Egypt joined the fold in 2005. And with several projects under construction, LNG supply will continue to increase in scale and diversity. By 2010 four more countries – Equatorial Guinea, Norway, Russia and Yemen – are expected to become LNG exporters. But, John Meagher, head of LNG research for Wood Mckenzie in Edinburgh, Scotland, questions just how quickly future supplies can be developed. The expansion of LNG is influenced by many factors such as gas exploration success, LNG marketing success, government policy, fiscal regimes, corporate positions and geopolitics – all of which are uncertain and subject to change, he says. Sempra LNG says that it can appreciate all of the concerns but that each impediment can be overcome. It says that before it would build any receiving terminal, it makes sure that it has the underlying contracts in place to fill the facility to capacity. Its Baja plant in Mexico, for example, is taken up in full by Shell and BP of Indonesia, all under long-term contracts. After those oil companies deliver the LNG to the terminal, Sempra then sells it into the market. Sempra also acknowledges the “short-term” incongruities between prices in the United States and Asia. But, it insists that as nations become more reliant on LNG, those differences will evaporate – just as they do with every other commodity. As the transition from a regional marketplace to a global one takes place, a universal price will emerge. “Some people say the United States is the market of last resort because it won’t pay as much,” says Sempa’s Hulse. “They are also saying the United States will not be able to compete. But, LNG will act as other commodities do and adjust to the laws of supply and demand. As the infrastructure is developed and as more production occurs, it will become a global commodity without distinctions by regions.” Clearly, the demand for energy will only increase, particularly as many underdeveloped countries grow their economies. The long run may hold out hope for fuel alternatives that include more green energy or clean coal opportunities. In the coming years, though, the United States and others around the world must address the natural gas supply imbalance. That necessitates more investment all along the LNG supply chain, from production to transportation to re-gasification, experts say. The response is attracting billions into the LNG arena. The risks involved, to this point, appear to be well considered. The buoy, above, is used to help anchor the LnG vessel and its network of pipelines to the mainland. 38 E n E rgyB i z November/December 2007

Table of Contents Feed for the Digital Edition of EnergyBiz - November/December 2007

EnergyBiz - November/December 2007 Contents Continental Grid Vision Needed Readers’ Views and Opinions Next for National Grid Clearing the Air The Need for Nuclear Energy Trade Status Report The Innovators California On The Leading Edge FERC Sparks Change Getting Coal Right Leadership in Times of Turmoil Innovation Delivers Return A Tale of Two IPOs LNGs Bright Prospects Generation Techologies The Age of Superconductors Leaders with Vision Get Ready for Plug-in Hybrids Betting on Batteries Cost of Decarbonizing Nuclear Helmsman – A chat with Dale Klein, Chairman of the U.S. Nuclear Regulatory Commission Global Energy Snapshot; Low-Income Energy Help; IT Spending Robust; The Greening of State Regulators; Generating Support Simplifying Offshore Wind Regs Chasing Construction Costs Energy Agency Sets New Course Deregulation Means Higher Rates Go-To Staffer Nightmare in Manhatten

EnergyBiz - November/December 2007

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.