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Gas.com Inc? A Smokestack Industry Faces the E-Future

Fortnightly Magazine - April 15 2000

LNG imports have significant advantages in the economics. One, they are not liquefying pipeline gas as they are importing gas that was distressed from somewhere else in the world. They are importing at whatever the market price is. Second, the LDC book cost, on a per-BTU basis, on average, is higher than the import facilities that were built in the '70s.

What does world natural gas competition mean for pipelines, E&Ps, and marketers?

For marketers, the development of a worldwide market would open up a new level of opportunity for arbitrage and trade.

For pipeline companies, the development of a world market opens up challenges in terms of value of existing infrastructure. If there were a functional world market, [in] some areas of the world the value of existing infrastructure would be challenged.

For E&Ps, a world market for gas will have quicker monetization in gas reserves - in general, an opportunity where they have large associated gas reserves.

Is siting still an obstacle for LNG? What other hurdles exist?

Certainly in the U.S., environmental hurdles, siting hurdles, and community relations are not getting any easier. Opponents will use every argument against something, including the danger aspect. Environmental compliance and siting regulations have gotten more onerous.

How long before natural gas imports become competitive with U.S. natural gas?

It's there now. It is the reason for resumed and very active interest in activating two remaining LNG and port terminals.

What would a world market for natural gas do to prices?

In the U.S., [imports are] an important marginal source of supply. It would add a needed increment of service in the eastern seaboard, such as 2 bcf into a 60 bcf per [day market]. In terms of pricing, it might dampen volatility in certain East Coast markets. Most of the LNG would come to the U.S. from Latin America, Africa, and spot cargoes from the Middle East and Asia.

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