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June 30, 2008

LNG to fill the time gap between clean coal and nuclear power

Analysis of: CO2 emissions policy to affect LNG imports, report says | www.ogj.com
This analysis is solely the work of the author. It has not been edited or endorsed by GLG.
Analysis By:
Hans Linhardt, PresidentHans Linhardt
President, LTDI, Inc.
Implications: Booz & Co. warns that European LNG import terminal investments may not pay off in case LNG from the Middle East and North Africa are redirected towards the US due to NG shortages for clean power generation. 

Analysis: The EU is worried about pending US carbon legislation and their push for import of increased volumes of LNG in order to cover the NG shortfall for clean power generation.  Since new nuclear power and/or clean coal power plants (with CCS capability) are at least five to ten years away from start-up, LNG and/or newly discovered gas on the OCS or elsewhere within North America have to fill the gap by 2015 of at least additional 10 billion cubic feet per day (bcfd). 

The EU has invested in 30 expansion and regasification terminal projects in order import 12 bcfd of LNG by 2015.  The alternative would be increased dependance on Russian pipeline NG.

However, redirection of LNG to the US from the Caribbean, North Africa and the Middle East can only occur if US NG prices exceed EU LNG prices.
And then, there is also the increased demand of the Asian countries like India, China and Japan that presently pay premium prices up to $20/MMBTU.

As there is no immediate power solution in sight for the US, NG prices will have to double to attract sufficient LNG to cover the gap between now and alternative energy sources including nuclear and clean coal.

It is a grim picture and another drag on our economy.  Congress has to get into action to support all possible avenues for increased energy supply and/or temporary tune down some of the rigid carbon legislation being considered during periods of power outages due to lack of sufficient NG supply.  Of course, we do have sufficient LNG import terminal capacity on the East Coast and Gulf Coast.  However, the West Coast has to fall in line to permit delayed LNG terminals in Oregon and California. 

  

 


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