The need to get started is here now. It takes years from the time a permit application is submitted to when a completed facility can receive LNG.
Posted on 04/02/2007 6:50:15 AM PDT by thackney
In the heated debate over competing liquefied natural gas proposals, one basic question has never been adequately discussed: Will California need LNG by the time we get the infrastructure to handle it? The answer is a resounding yes. We can debate where the receiving facilities should be built, but we should not lose sight of the fact that we will need LNG to have a secure energy future for California.
Natural gas demand
Total U.S. demand for natural gas is about 22 trillion cubic feet (TCF) a year. The Department of Energy's Energy Information Administration expects this to reach 26.1 TCF by 2030 with much of the growth before 2020. Gas is the fuel of choice for generating electricity while meeting today's stringent clean-air regulations. As a result, gas consumption in this market has been increasing at almost 5 percent a year. We are now using more than 50 percent more gas than nine years ago! More than half of existing U.S. power plants, and the overwhelming majority of those currently under construction, burn natural gas.
California by itself uses about 10 percent of the U.S. total. While almost 60 percent of our annual usage is for residential, commercial and industrial use, just over 40 percent is burned to generate electricity.
California's electricity today comes from an array of sources but we are very heavily, and increasingly, dependent on gas. The California Energy Commission reports that all 37 plants built since 2001 burn natural gas, as do 18 of the 20 currently under construction.
The CEC projects that our total gas consumption will increase by about 25 percent by 2016, a forecast it produced before the California Public Utilities Commission ruled Jan. 25 that California's power companies may no longer import power from out-of-state coal-burning plants, unless they can be made as clean as a combined cycle natural-gas-fired plant. The CPUC itself does not expect this to be possible.
The upshot of this ruling? California will lose access to 20 percent of its currently available electricity supply. Whether from in-state or out-of-state sources, we will get replacement power in all likelihood from generators burning natural gas. Where do we get the gas?
Natural gas supply
California produces only 15 percent of the gas it consumes, and imports 85 percent — all via pipeline — from Canada and the U.S. states to our east.
California's own production has fallen by almost a third since 1980. Therefore, without access to LNG, California's future supply will depend on the extent to which Canada and the balance of the U.S. can develop or import gas in sufficient quantities to meet their own needs and — at the end of the pipeline — ours.
How optimistic should we be? Natural gas produced in the United States peaked in the early 1970s at around 21 to 22 TCF per year. Today, we produce less than 19 TCF a year. Imports from Canada have made up for our shortfall. In 1990, we imported about 1.5 TCF. By 2005, we were importing more than 3.6 TCF annually. California is even more dependent on Canadian imports. In 2005, 23 percent came from this source. However, Canadian production appears to have peaked in the 2000-02 period.
With today's high gas prices, there is a scramble to find additional gas. The number of rigs exploring the U.S. and Canada has tripled since 1998. Clearly, the oil and gas industry is pulling out all the stops to find additional resources. Just as clearly, the industry has been unable to find significant new sources of gas.
The fundamental reason for this is that the U.S. and Canada are the most thoroughly explored nations on Earth. The gas reserves we appear to have left are smaller, more expensive to develop, and deplete faster than those of earlier years. Consequently, the industry must drill increasing numbers of wells at great cost just to keep our gas production from falling still faster.
One very important group of people has seen and accepted this scenario and it is convinced that LNG will be the only solution to our impending natural gas shortage. These are the companies that have announced proposals to build 43 new LNG import terminals around the coastline of the United States! Private industry is eager to commit tens of billions of dollars based on their belief that (a) the need is there, (b) gas prices will stay high indefinitely and (c) they can make a good return on their investment over the life of the proposed projects.
Is it possible California will continue to have access to adequate supplies of reasonably priced natural gas without allowing LNG to come in? It is possible, but it will not be under the control or even the influence of the state of California. As Californians, we should not plan the future of our state around possibilities. We must do what we can to steer our way into a future that is always less than perfectly predictable.
If we allow one or more LNG import facilities, we greatly increase our energy supply options and pave the way for a more secure energy future for the state.
If we do not, we will be at the mercy of future events, with very little maneuvering room. There are no easy "do overs" when dealing with a policy issue of this magnitude.
— Jef Kurfess, of Westlake Village, is a management consultant, energy analyst and corporate planner who worked earlier in his career for Booz Allen, A.T. Kearney, Deloitte, Dole Food Co. and various oil exploration companies. He has a bachelor of arts degree from UC Berkeley and an MBA in finance from UCLA Anderson School. He owns stock in BHP Billiton and Woodside Petroleum, along with domestic natural gas producers' and oilfield service companies. This commentary was not solicited by anyone.
Further, we know how to handle LNG and the distribution system already exists. Some clever child could even develop a safe home liquifaction and storage system.
IMO, LNG is the way to go for the intermediate term until battery technology advances so that nukes could power electric cars.
Met with a gas drilling company who mentioned that their production costs for gas wells has tripled in the past few years, and that so many wells are bring sunk into proven reserves like the Barnett Shale in Texas that they are already seeing production drop per well.
I bet that there is still plenty of NG available but the ability to bring in LNG is a good thing. I hate sending our money overseas, but I hate being cold and without power even more.
Are you seeing much NG activity on the North Slope?
Instead of beginning to establish the infrastructure now, it will be typical to wait until the need for LNG is urdent before starting on such a project. It will then cost much more to get LNG on-line. Besides the Dems will try to roadblock the projsect in order to placate their bed-wetting, hand-wringing environut, friends
Correction: the Dems will try to roadblock the projsect in order to placate their bed-wetting, hand-wringing environut, friends and enrich corporate stockholders.
There, fixed it.
If you think environmentalism is anything but dropping a dime on useful idiots and crooked lawyers to effect tax exempt racketeering, I have bad news for you. The globo thugs want to render this country incapable of supporting or defending itself. They are winning.
Without a pipeline to bring it South, the only NS NatGas is used for fuel on the North Slope, used as Gas Lift for Oil Wells or re-injected to maintain reservoir pressure.
The need to get started is here now. It takes years from the time a permit application is submitted to when a completed facility can receive LNG.
Excactly my point, but do you see any movement toward this end?
No just the opposite. Feet dragging, environmentalists and NIMBY's will push us behind the curve. Natural Gas prices may make oil prices look cheap in 5~7 years.
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