LNG in the News Again
May 17, 2013 § 3 Comments
The DOE announced today approval of another LNG export permit. The story linked here points out that FERC approval is still pending. It also expresses surprise that this announcement came a day or so after Secretary Moniz was confirmed unanimously in the Senate. The comment suggests that they would have expected Moniz to settle in before making the decision. The cynic in me says they waited until after the confirmation before posting the decision so as not to lose any votes. Also, the suggestion that Moniz, while at MIT, was not completely clued into the LNG debate is laughable.
The usual people are predicting the beginning of the end of cheap gas. Let’s do the arithmetic. The Cheniere permit plus this one brings the permitted export to 3.5 billion cubic feet (bcf) per day. Compare that to the current consumption of about 68 bcf per day. This is around 5%. This is material, but is not going to change the price. For one, the country already has shut in capacity that likely exceeds that. Certainly hardly anyone is drilling for dry gas now. The eastern Pennsylvania and Haynesville bust towns will attest to that. From the day you decide to do it, gas production is possible in as few as 21 days. But, figure on it being 90 days. Compare that to the fact that no new gas will be needed till at least 2015 (Cheniere) and 2017 for the newly permitted outfit.
Expect for sure that gas required for these two permits, when needed, will more than adequately be supplied by existing shut in facilities, possibly augmented by new wells. One of the features of shale gas that is so unusual is that the spigot can be switched on so quickly. With conventional offshore gas that would have taken five years.
This aspect of shale gas, that it can be produced on demand, is what bothers the Sierra Club and other opponents. They may even be concerned that a rush to produce more may cut corners. There is merit to this last point. However, after some laxity, most states, including ours, are putting down stringent regulations. Much of the problem in Pennsylvania can be attributed to inadequate regulation and the unpreparedness of the small operators, and the communities, for that matter. Waste water was sent to municipal treatment facilities with the best of intentions. They were simply not suited to handle it. We know that now.
I believe that due to the lag time to actual operation of LNG plants, permitting of up to 10 bcf per day will be benign. The suppliers will have plenty of time to fill the gap. Also, by that time most regulations assuring sustainable production will be in and functioning. The US EPA regulation requiring zero fugitive methane emissions at well sites by 2015 will be in place. The technologies for handling these small volumes of gas will also have time to be developed.
The protestations of chemical manufacturing entities such as Dow, as reported in the cited piece, aside, there is no question that cheap natural gas is causing a renaissance in US industry today. Many industries in Europe and Asia will simply not be able to compete with US companies. They will be forced to invest here. This will be good for us. More jobs and more economic growth. Consequently, LNG exports permits ought to be carefully considered to not squander this incredible advantage. Then there is the Alaska wild card of which I wrote recently.
LNG exports are a good thing if we do it smartly.