To better understand the evolving outlook for LNG and its role in the U.S. gas market, Fortnightly assembled a group of LNG specialists with various perspectives on the issues.
Gas Executives Forum: The New Downstream Dynamic
Gas distributors tell how their business strategies are changing in response to issues such as higher gas prices, electric M&A, LNG, and gas pipeline development.
siting and contracting. The industry is sorting through those and has made good progress. Also good progress has been made on the Alaska natural gas pipeline. Congress has provided financing incentives, and FERC has developed open-season provisions ( see sidebar “Getting Gas” ). Now the question is who will finance it and who will build it.
As challenging as this progress has been, we must continue advocating public policies that are appropriate to develop both supply and conservation options.
Fortnightly Assuming LNG terminals proceed to construction, will pipelines and storage become the next bottleneck in the U.S. gas market?
Fowler, Duke Energy: LNG will drive the development of pipelines and storage. With the introduction of LNG, huge volumes of gas will hit different parts of the system. There's a lot of work to be done to take this gas and distribute it to where the market requires it, and it will dramatically increase the need for new storage capacity across the system.
Bertasi, Southern Company Gas: We think storage is adequate to serve existing needs today, but whether more capacity will be needed depends on the rate of growth in demand. Traditional retail demand isn't hard to predict, but what's harder is power and industrial demand. If they grow at a good clip, there will be need for more storage capacity.
Jesanis, National Grid: LNG imports lead to issues involving the diversity of delivery points. The system in New York state is quite adequate, and we've secured storage capacity to serve our domestic growth requirements. But in other parts of the Northeast, additional storage would be desirable.
Downes, New Jersey Resources: We will be able to meet demand growth without any problem, but it becomes a question of price. Pipelines and storage will play key roles as they always have and always will. We just increased our total storage capacity from 19 Bcf to 21 Bcf.
Felsinger, Sempra Energy: Substantial LNG imports over the next decade will cause a fundamental shift in how the gas business operates. Pipelines and storage are natural plays in a market driven by rising gas prices and additional LNG imports.
Pipelines will be needed to move gas from the new production basins, which will be LNG receipt facilities. In the next decade, we will need new investment in pipelines—most likely to bring gas from the Gulf of Mexico to the rest of the country. There's a lot of infrastructure there already to strip out the high-Btu substances, allowing imported LNG to meet U.S. pipeline requirements. Pipelines will be needed to connect major markets to major transportation hubs.
At the same time, there will be need for additional storage. With prices in the range we are talking about, it doesn't take much of an upset in demand or delivery to spike prices. A lot of things could happen to the LNG trade that could drive prices to unusual levels. People want to hedge their bets, so they need reserve margin to ride out major events. We are developing a number of storage projects in the Gulf area and