The Cost of Importing Liquefied Natural Gas
Tuesday, October 14, 2008
Sempra Energy begins to import foreign liquefied natural gas next year. Foreign lng costs more than domestic natural gas. Sempra says price should not be the only consideration. This week California regulators will decide how much price matters. KPBS Reporter Amita Sharma has more.
To Sempra, spending one billion dollars to build a new liquefied natural gas terminal in Mexico was visionary.
Sempra projections show domestic natural gas supplies will run out…while American demand will rise.
Under that scenario, American utilities would be forced to import liquefied natural gas through terminals like the one near Ensenada.
Sempra’s prediction and the reality do not match. In fact, the United States is in the middle of a natural gas boom.
Price: The growth in the domestic natural gas market is almost astonishing.
Tom Price is a vice president with Chesapeake Energy Corporation….one of the country’s largest natural gas producers. He says the surge is driven mostly by advances in technology.
Price: It has absolutely revolutionized the drilling of natural gas in the United states.
Jamie Webster of CFE Energy says the new technology can now free up gas deep within large shale beds.
Webster: You’ve seen some real growth in Texas with the Barnet Shale, all up in the Rockies and over the next couple of years we’ll see some more production in the Haynesville Shale which is in Louisiana and the Marcella Shale which is in the northeast.
At the same time, Webster says there’s been a dramatic increase in demand for natural gas in Asia where countries import as much as 90 percent of what they need and they’re willing to pay three times as much for the fuel.
Webster: I have seen prices as high as $22 per million but while out there in California right now, wholesale gas prices are around 6,7,8 dollars.”
It’s against this market backdrop that Sempra subsidiaries SoCal Gas and SDG&E say price should not be the primary consideration in whether utilities should enter into long-term contracts for LNG.
But what if price weren’t the top factor?
Powers: What it means is that the consumer would be paying considerably more for natural gas than they would otherwise and that it would be a completely voluntary move.
Bill Powers is a local consulting engineer and a member of the Ratepayers for Affordable Clean Energy coalition.
Powers: At this time in California, money is tight. We have ample domestic natural gas. It’s demonstrably cheaper and we have a private company that rolled the dice, built a huge terminal in Baja California under the presumption that in a few years when it was ready, lng would be less expensive than domestic gas. They bet wrong. In fact, they bet dramatically wrong.
But SDG&E and SoCal Gas say the market for lng is changing rapidly.
Navigant Consulting Firm doesn’t agree. It put out a study this summer showing there is every reason to believe that the current price structure will continue … Again, Chesapeake Energy’s Tom Price.
Price: We believe we have about 120 years worth of natural gas reserves at the current consumption levels. It is a complete game changer.
Environmentalists say price is not the only problem with natural gas from abroad. They say that simply transporting the gas from other countries to Sempra’s facility south of the border will increase greenhouse gas emissions. And since foreign gas burns hotter in appliances and releases more nitrogen oxide, that will undercut the state’s goal of reducing emissions 25 percent by 2020.
Critics also argue that importing lng would undermine the federal goal of reducing reliance on foreign fuel.
Amita Sharma, KPBS News.
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