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Tuesday, November 20, 2018

Maritime Logistics Professional

LNG & Exports: What’s not to Like?

Posted to Global Maritime Analysis with Joseph Keefe (by on January 30, 2013

The benefits of exporting U.S. natural gas are many. The arguments against it are flimsy and (literally) running out of gas. What are we waiting for?

I think it was oil major BP who opined recently that the United States could very easily be 97 percent energy independent by the year 2020. That sounds good to me. And, it turns out that getting to the Promised Land will be easier that you might think. That said; I’m at a loss to understand why we aren’t moving ahead aggressively to make that happen.

 

At a time when we have become a net exporter of refined products and domestic energy production has increased to robust levels, augmented by new finds in places like North Dakota, the need to import foreign energy is slowly starting to wane. That’s good news for the trade deficit, tax revenues, job markets and a handful of other metrics. Beyond this, it is now estimated that United States holds more energy in the form of natural gas than Saudi Arabia has in crude oil reserves. And, unless everyone else has been lying to me, that natural gas is cleaner to burn than crude oil. It’s all good. Now, however, we have to find a way to get that gas to market – here and abroad.

 

  • Then – and Now

The current discussion about exporting natural gas takes me back to when a (then) fairly obscure state governor from Alaska stood up to the oil majors and told them in no uncertain terms to start producing on the leases they had been awarded on Alaska’s North Slope and to get the trans-Alaska gas pipeline built to transport that gas down south. Sadly, she got stars in her eyes and the rest is history. The gasline stalled, and whatever you think about Sarah Palin’s wider political views, she was a pretty effective governor in Alaska. I wish she had stayed where she was. We might have gas moving down to Valdez today, had that been the case.

 

Right around the same time, there were as many as 45 LNG import facilities being considered for federal approval. Very few ever came to fruition, but at the time, the US Energy Information Administration (EIA) projected natural gas to be the second biggest fuel source for electrical generation by 2025. Also at that time, the US consumed more natural gas than it produced and this trend was expected to continue. The thought back then was that we would tap continue to tap into Canada’s good will and eventually, take in supplies in the form of liquefied natural gas (LNG) at any one of dozens of proposed facilities in North America. How quickly things change.

 

Interestingly, conventional wisdom back in 2007 also held that if as many as 12 LNG terminals come to fruition in the US Gulf, up to 15 BCF/day could be introduced to the supply equation. This gas would compete with the existing production of 60 to 70 BCF/day, add to it, and eventually, replace some of the expected decline in domestic production. It was also speculated that the combined effect of the new LNG on pricing in the domestic markets could very well depress prices over the long term. Given these prognostications, it is today interesting to hear industrial users moan about the coming spike in prices because we are going to export a little bit of our new cornucopia.

 

  • Looking Ahead

Billionaire T. Boon Pickens – who am I to argue with him? – has said that that natural gas could eventually turn into the greatest economic opportunity of the 21st century. Again and before then, it was thought that the United States would be a net importer of natural gas for years to come. It has all come full circle in less than 6 years; all the way from business consortiums lobbying the government to let them build scores of import terminals to the present day rush to build export facilities.

 

I don’t know much, but I can point you in the direction of those that do. A recent study put out by the U.S. Government points to GDP gains that will increase in a linear fashion with the amount of LNG that we export. Indeed, a report commissioned by the U.S. Energy Department concluded that for every market scenario studied, the greater the volume of LNG exports, the greater the economic gain. Tapping into the huge quantities of shale natural gas in the United States could yield even greater benefits for America. Separately, the American Petroleum Institute has urged the Energy Department to quickly approve pending applications for LNG exports as a way of producing a big win for the U.S. economy.

 

Of course, not everyone is happy with this potential storybook ending to a very tough 5 year downturn. The Sierra Club, for example, insists that increased gas exports will cause higher gas prices and lower domestic wages, as well as increased risks associated with hydraulic fracturing, which would likely increase once LNG exports ramped up even further. On the other hand, I’ve got news for the Sierra Club and U.S. industrial users who fear the same price effect: the price is going to go up no matter where it is consumed.

 

In the end, exporting gas to countries that desperately need it has undeniable benefits to our local economy. When Royal Dutch Shell recently announced a deal with Kinder Morgan for a U.S. export facility, Marvin Odum Shell’s President declared, “This announcement underscores how the abundance of natural gas in the U.S. is changing the energy landscape. With a measured, phased approach, exports of cleaner burning natural gas can help meet the world’s rising energy needs while also giving a boost to the U.S. economy.”

 

Odum’s counterpart at Kinder Morgan, Richard Kinder added, “This project will facilitate further development of the abundant natural gas resources in the United States and will be a positive factor in the overall balance of trade between the U.S. and other countries.” And, who wouldn’t like to see that trade deficit shrink just a little bit?

 

As more gas is exported, more will be developed, and eventually, the abundance of LNG will wean us from foreign dependency. As that happens, the United States will burn less diesel and use more gas to power rigs and the offshore supply vessels that service them. The environmental benefits alone would be staggering. Getting back to the government study, the notion that more jobs would be created is somewhat dispelled. Actually, while there would not be a significant increase in employment as a function of LNG exports and domestic natural gas development, this sector would replace jobs in other areas that are rapidly seeing them go away. That’s better than a sharp stick in the eye.

 

  • National Security

Increased energy development, especially in terms of our abundant supply of natural gas, is about national security: financial security, physical security and everything in between. In a world where a good percentage of the energy we import comes from areas of political instability, transiting potentially unsafe waters and is controlled by folks who aren’t necessarily friendly to us, there is every reason to move forward with natural gas development and exports. In one fell swoop, we can make those suppliers who don’t like us irrelevant, drastically reduce our trade deficit, clean up the air we breathe, add billions to the tax coffers and take energy out of the national security equation. I don’t know about you, but all of that sounds pretty good right now. As the editor of two maritime publications, I also like the fact that domestic port infrastructure will have to be drastically improved to support that effort.

 

Natural gas is the answer. Exporting that gas is a good idea. The time is now. Is that such a difficult concept to understand? – MarPro.

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Joseph Keefe is the lead commentator of MaritimeProfessional.com. Additionally, he is Editor of both Maritime Professional and MarineNews print magazines. He can be reached at jkeefe@maritimeprofessional.com or at Keefe@marinelink.com. MaritimeProfessional.com is the largest business networking site devoted to the marine industry. Each day thousands of industry professionals around the world log on to network, connect, and communicate.

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