U.S.’s thirst for liquid natural gas growing

updated 4:46 p.m. ET May 8, 2007

HACKBERRY, La. - Just down the road from this isolated fishing hamlet in the bayou country of southwestern Louisiana, a massive complex is rising to handle the nation’s growing demand for natural gas.

Cranes tower over arena-sized containers that stand 170 feet tall and 250 feet in diameter as hundreds of construction workers bustle about. Sempra Energy Inc. expects the $750 million terminal to begin operating in 2008 as the arrival point for tankers carrying liquefied natural gas.

While the energy industry regards LNG as a vital step in keeping up with the demand for natural gas in the United States, proposals to build terminals are raising environmental and safety concerns.

Largely little used until natural gas prices jumped in recent years, gas cooled to minus 260 degrees and turned into liquid is the only practical way to import supplies from overseas.

Energy companies have proposed 35 new U.S. terminals in 10 states and five offshore areas near the coast. Eighteen terminals have been approved by the Federal Energy Regulatory Commission.

The majority of the projects are proposed for the Northeast, which has seen huge price increases for heating oil and public distrust of nuclear power; California, where natural gas is in high demand for power generation; and the Gulf Coast, where LNG processors can easily plug the finished gas product into interstate pipelines.

Some are near urban areas, where, despite demand for natural gas, LNG developers are running into opposition.

Among the projects are a $700 million terminal near Freeport, Texas, being built by Freeport LNG Development LLC; McMoRan Exploration Co.’s Main Pass offshore terminal off southern Louisiana with a $1 billion price tag; and Hess LNG LLC’s $350 million to $500 million terminal proposed near Fall River, Mass.

In the Cameron Parish village of Hackberry, charter boat operator Freddie Beard — still trying to recover after 2005’s Hurricane Rita — is little concerned about the LNG terminal. Beard said he believes the terminal would be safer and potentially less polluting than the rows of refineries and chemical plants in the Lake Charles area to the north.

“They’ve brought in a lot of business since the storm,” Beard said of Sempra and its 500 construction workers.

Beard’s cousin, Lonnie Beard, a commercial fisherman, said he might apply for one of the terminal’s 90 permanent jobs because of tough times in his lifelong business.

As the nation’s thirst for energy continues to grow, market prices have sparked new interest in natural gas, which once was regarded as a nuisance in the oil fields.

In 1999, gas traded on the New York Mercantile Exchange at an average price of $2.35 per million British thermal units. Last year, the price averaged $9.20. In between, there were price spikes as high as $20.

The United States consumes about 60 billion cubic feet of gas per day — about a quarter of its energy consumption. Gas heats more than 60 million U.S. homes and is the fuel of choice for generating power in many areas.

At the same time, gas supplies are getting tighter.

In the Gulf of Mexico, production has declined by more than 4 billion cubic feet per day since 2001, while production in the North Sea is dropping by 15 percent a year as easy-to-reach deposits play out. Alternatives such as deepwater drilling in the Gulf, drilling deep into the bottom of shallower Gulf waters and going after gas in the Rocky Mountains are more expensive.

Importing natural gas in its liquid state often is a cheaper alternative, said Darcel Hulse, Sempra chief executive officer.

In its liquid form, 600 times the volume of the natural gas product can be stored in the same space, making Sempra’s storage the equivalent of 10 billion cubic feet of natural gas when heated and moved on to pipelines.

The plant will be able to reheat about 1.5 billion cubic feet daily.

Print this Email this Blog this  IM this

MORE FROM OIL & ENERGY

Oil & Energy Section Front

U.S. suspends deliveries to oil reserve Some see oil bubble; others see trouble Crude prices near $128 a barrel Conoco exec says high oil prices not a ‘friend’ Old gas pumps can't handle higher prices Wind could provide 20% of nation's energy Oil execs see $100-or-less cost by year’s end Rising cost has some drivers easing off the gas Truckers slow it down to save on diesel Will oil prices continue to stay high? Oil & Energy Section Front   Add Oil & Energy headlines to your news reader: