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LNG's Final Hurdle

Interchangeability issues threaten to delay vitally needed LNG projects.

Fortnightly Magazine - March 2006

demand for natural gas, those LNG suppliers that have upstream assets and are participating in liquefaction projects will take into account the fact that the U.S. gas stream is cooler than most foreign sources. In addition, because of the capital investment already committed to liquefaction and regasification projects, it also is likely that the importers will take necessary measures to meet reasonable gas composition standards. Importers have significant incentives to import gas that meets tariff specifications. While most in the industry do not support a one-size-fits-all solution, all agree that certainty is required, whether that certainty is on a pipeline-by-pipeline basis or established regionally.

As Commissioner Kelly predicted, gas composition issues have risen to become a significant hurdle for the industry. Resolving these challenges will not be easy, requiring all stakeholders to apply a thoughtful approach to understanding the issues. Conflicts might occur before those issues are resolved, but eventually agreements will be reached that allow projects to move forward.

Such progress serves the interests of virtually all stakeholders. After all, despite the diverse perspectives of various players in the natural-gas industry, one goal remains common: to ensure a safe and stable natural-gas industry for the future with adequate supply to meet consumer demand.

 

Endnotes:

1. “Stakeholders Call for Renewed Negotiating Effort on Gas Quality, Interchangeability,” Inside FERC, Nov. 14, 2005.

2. Natural Gas Pipeline Company of America, “Initial Decision,” Docket No. RP01-503-002 and -003, (issued Dec. 20, 2005).

3. Cove Point LNG Limited Partnership, 102 FERC ¶ 61,227 (2003).

4. AES Ocean Express v. Florida Gas Transmission, Docket No. RP04- 249-002.

5. FERC v. Southern Natural Gas Co., Docket No. CP05-388-000.

6. Natural Gas Council+, “White Paper on Liquid Hydrocarbon Drop Out in Natural Gas Infrastructure,” and “White Paper on Natural Gas Interchangeability and Non-Combustion End Use” (Feb. 28, 2005).

7. Docket No. PL04-3-000.

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