X-Message-Number: 21944
From: "Mark Plus" <>
Subject: Natural gas economics turn international 
Date: Tue, 10 Jun 2003 22:49:13 -0700


Natural gas economics turn international
By Hil Anderson
UPI Chief Energy Correspondent
Published 6/10/2003 7:06 PM

LOS ANGELES, June 10 (UPI) -- Federal Reserve Chairman Alan Greenspan 
Tuesday dumped icy cold water on the notion that natural gas will be able to 
keep the U.S. economy humming without the uncertainty that accompanies 
dependence on foreign oil imports.

Testifying before the House Energy and Commerce Committee, Greenspan said 
the nation appeared destined -- or doomed -- to include not only gas 
produced in North America in its energy mix for the 21st century, but also 
on increasing volumes of liquefied natural gas, or LNG, from overseas.

"Given notable cost reductions for both liquefaction and transportation of 
LNG, significant global trade is developing," Greenspan told the committee. 
"High gas prices projected in the American distant futures market have made 
us a potential very large importer."

The quest for energy independence remains as elusive today as it did in the 
1970s when a little-known coalition of Middle East states rudely made 
Americans aware of the global nature of energy markets and the United 
States' dependence on oil from overseas as witnessed by long snaking lines 
at gas pumps around the country.

The United States now faces a potentially similar relationship with overseas 
gas producers as it becomes more apparent that it simply won't be possible 
to meet the nation's growing appetite for clean-burning gas to produce not 
only heat for homes but also electricity and the raw material for fertilizer 
and petrochemicals.

Greenspan told the members that a sizable LNG infrastructure would acts as a 
"safety valve" to supplement domestic gas supplies during shortages; however 
many of the major sources of LNG are nations that have their own political 
turmoil, including the Middle East, Algeria, Indonesia and the former Soviet 

Not all is lost, Greenspan said, noting that LNG sources can be found in 
extremely stable regions as well and are not concentrated heavily in one 
particular area as is the case with crude oil and the Middle East.

"There is a much greater dispersion of natural gas reserves throughout the 
world that shouldn't be subject to the types of problems we have when 
three-fifths of our crude reserves currently exist in a very small area of 
the world (the Middle East)," Greenspan said. "I recognize there are 
security problems with natural gas supply, but they are less than for oil 
because we have significant reserves of natural gas in areas which are not 
serious problems with respect to national security."

The American Gas Association estimates that U.S. natural gas consumption 
will grow 50 percent by 2020, and Tuesday's hearings -- held on the eve of 
the Energy Department's emergency summit on natural gas supplies -- 
concluded that there is a lot more to increasing gas supplies than simply 
opening up protected lands to exploration.

Witnesses from the energy industry testified earlier in the day that the 
nation's gas infrastructure, particularly pipelines and underground storage 
facilities, currently are inadequate to handle a major increase in domestic 
production, and the current regulatory climate makes investing in such 
projects unattractive to Wall Street.

"Investing in energy infrastructure is distinctly unprofitable," Goldman 
Sachs energy economist Jeffrey Currie told the committee. "A combination of 
regulation, taxes and indirect market intervention has made the return on 
capital in the energy industry a break-even proposition at best."

While the political debate continues over the need to speed up permits for 
new pipelines and remove restrictions on energy exploration on protected 
federal lands, the U.S. Energy Information Administration is predicting a 
major increase in the amount of LNG imported to the United States.

LNG is natural gas that is super-cooled and converted to its liquid state so 
it can be hauled aboard specially designed tankers from overseas to 
terminals where it is returned to its gaseous state and shipped inland by 

The EIA noted this year that world LNG trade grew more than 50 percent 
between 1995 and 2001 and predicted the annual U.S. consumption of LNG would 
grow from the current level of around 200 billion cubic feet to 200 trillion 
cubic feet in 2025.

A stumbling block is the fact there are only four LNG terminals in the 
United States. New facilities are in the planning stages in both the United 
States and Mexico, however they face regulatory hurdles and must rely on 
there being pipelines to move the gas to market once on shore.

Once the LNG infrastructure is increased and melded into the nation's 
overall energy grid, U.S. companies will be able to expand the number of LNG 
suppliers they have relationships with and take advantage of price 
competition -- at least until the suppliers form their own OPEC and start 
trying to manage the market themselves.

In the meantime, however, Greenspan sees LNG as a means of removing the 
current supply restrictions and keeping natural gas as the preferred fuel of 
the future.

"That gives us the capability of making other judgments as to what are the 
tradeoffs between the environment and domestic energy production," Greenspan 
averred. "If we do not have that international safety valve, then of course 
we'll face some very tough decisions."

Copyright   2001-2003 United Press International

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