by The Maven
Wed Jun 15th, 2005 at 09:52:30 AM EST
Further to Jerome's story on energy consumption, it seemed logical to post this as well. (Originally, this was designed as a comment there, but it got a bit too large for that.) I realize that there's a distinct U.S.-focus to this, but because of the tie-in with Jerome, here goes:
Today's New York Times has a front page article on the explosive growth of U.S. imports of liquefied natural gas ("LNG") and the likely impact that this trend will have on a variety of issues, several of which are discussed further after the break, below.
The principal focus of the piece is on the need to build a significant number of new terminals to handle the imports and the objections that the proposed construction is stirring up. Patrick Wood III, the chairman of the Federal Energy Regulatory Commission, expects at least eight additional terminals to be built in the U.S. (or just offshore) by 2010. The article notes:
Energy companies want to construct more than 40 such terminals at a cost of $500 million to $1 billion each. The emerging conflict is taking place as some scientists and environmentalists say that the nation is once again placing too little emphasis on improving energy efficiency and making investments in other methods for producing power and heat, including wind, biomass and nuclear energy.
Meanwhile, utilities that buy gas warn that in becoming ever more reliant on natural gas from abroad, the United States would be running the same risk it made when it came to depend on oil from unstable sources in the Middle East.
It's not clear to me why energy companies are so eager to build so many new terminals at such great cost while at the same time they appear to have such reluctance to the idea of building new oil refining capacity in the U.S. Perhaps someone can educate me.
The Times piece cites a portion of the BP report which notes that proven global gas reserves are equivalent to 67 years of supply at current production rates (as opposed to only 41 years for oil), but it fails to note that the reserves-to-production ratio has remained essentially fixed since 1990; oil's ratio has remained roughly stable since 1986, so there's really not that much difference there. And it goes on to point out:
Strong demand for natural gas is occurring not just in the United States, but in the fast-industrializing economies of China and India, which are set to compete for supplies. The United States is expected to emerge as the world's largest L.N.G. market, with imports forecast to account for as much as 20 percent of natural gas consumption in the United States by 2015, up from only about 2 percent today.
Gee, where have we heard that before, indications of a potential global demand crunch coming down the pike?
Responding to the energy industry's urgency, Congress included in the broad energy legislation approved this spring in the House, and given clearance in May by the Senate Energy and Natural Resources Committee, a provision that would effectively usurp the authority of states to block L.N.G. terminals.
Six governors from coastal states, including Arnold Schwarzenegger of California and Mitt Romney of Massachusetts, wrote to the Senate committee, asking for states to remain on equal footing in L.N.G. reviews.
Senator Charles E. Schumer, Democrat of New York, said this month that he opposed an L.N.G. terminal in Long Island Sound, citing security concerns.
Those officials are opposing senators like Lamar Alexander, Republican of Tennessee, and Tim Johnson, Democrat of South Dakota, who are pushing to bolster federal authority.
Notice how these supporters come from states that aer hundreds of miles from the coasts where the terminals (and the dangers they might bring) are located.
At present, there isn't really much coordinated activity among major producers of natural gas, and today's article looks at the possibility of a production cartel with some skepticism:
Qatar and 12 other gas-rich nations, including Iran, Egypt, Nigeria and Venezuela, met in April to discuss ways to keep L.N.G. prices satisfactorily high. The group, called the Gas Exporting Countries Forum, is still in its infancy and for now is incapable of modeling itself after OPEC, but its members agreed to establish a liaison office in Doha, Qatar.
Daniel Yergin, an energy analyst and author of "The Prize," a history of the quest for oil over the last century, argues that it would be difficult for a confrontational cartel of gas producers to take hold over the next several years. He said that is because L.N.G. producers will be competing with each other for market access and relying heavily on Western energy companies to shoulder much of the multibillion-dollar risk of large L.N.G. projects.
"Managing price would be negative for an industry set to grow rapidly over the next 10 years," Mr. Yergin said. "There is more pronounced interdependence of consuming and producing countries for natural gas than for oil."
In many respects I find this somewhat surprising coming from Mr. Yergin, especially considering that few energy analysts were terribly concerned about the ability of OPEC to control production and pricing in the first few years after its formation in 1960. See where that belief got everyone?
Others view the growing reliance on imported natural gas in the United States more ominously.
"We accept having L.N.G. as part of the energy solution, but we're very concerned about making the same mistakes we made with imported oil," said David Schryver, vice president for Congressional affairs at the American Public Gas Association, which represents municipal gas utilities that would consume much of the imported L.N.G. "Facing the prospect of another OPEC for natural gas is alarming."
Despite such concerns, L.N.G. imports to the handful of terminals that exist in the United States soared 29 percent last year and are set to increase rapidly throughout this decade.
On the whole, we're not painting a pretty picture of an energy-dependent future, in the U.S. or elsewhere.
Who wants to say it with me: "Unsustainable Growth." Thoughts, anyone?