The New Gas Station
With domestic natural gas in short supply, the nation looks overseas
The goldfish trick did little to persuade the people of Vallejo that it would be safe for supertankers to dock close to their shore on north San Francisco Bay. Last year, residents were shown a video of a man pouring liquefied natural gas (LNG) into a fishbowl. Since LNG evaporates instantly, the goldfish weren't harmed. But what about the people who live near a terminal where LNG is unloaded from the tankers and converted into a flammable gas every day? No matter how many safety demonstrations they staged, energy giant Shell and engineering firm Bechtel never were able to dispel community fears and abandoned their plans to import LNG there early this year.
It was just one skirmish in what is shaping up to be the energy battle of the next decade, thanks to the growing U.S. appetite for natural gas. The days when North America was able to produce its own natural gas are ending. Without a new supply from overseas, many experts believe the economy will suffer debilitating price spikes for this crucial fuel. "There is no way we can be self-sufficient," Federal Reserve Chairman Alan Greenspan told a congressional committee recently. Greenspan decided to speak out after observing that the price of contracts for natural gas deliveries several years out were skyrocketing past those of oil. Even now, with natural gas selling at nearly double the price of a year ago, supply and demand are out of whack.
Not so slick. Shipping natural gas from overseas is not easy or cheap, however. Marine terminals must be built, and security of this potentially hazardous cargo must be addressed. And with foreign oil dependence already a concern, a move toward LNG would propel the nation into a new era of reliance on countries like Algeria, Nigeria, and Trinidad.
For 60 percent of U.S. households, natural gas provides the blue flame on the stovetop and fires the home furnace or water heater. Even all-electric homes may rely on natural gas; it has become the fuel of choice for big power plants. Industry also uses natural gas as a chemical feedstock. But many wells are depleted, and other stores are off-limits under environmentally protected land. The Department of Energy predicts natural gas use will increase 52 percent by 2025 while production will rise only 35 percent. "We've decided we want a lot of electric generation from gas because it's cleaner," says Robert Ineson, a director at Cambridge Energy Research Associates. "But we've thought it to be limitless and inexpensive, and that's proven not to be the case."
But there are major reserves of "stranded" natural gas in poor countries or remote locations around the world that can be captured as LNG. Until this year, LNG accounted for less than 1 percent of U.S. natural gas use. Four import terminals built in the 1970s saw little use. LNG production was expensive, while domestic natural gas was cheap. Now energy companies have improved methods and reduced costs some 30 percent. Production is soaring and LNG has begun steaming to U.S. shores. This summer, for example, the updated import facility at Cove Point, Md., owned by Dominion Resources, will receive its first LNG shipment since it was mothballed in 1980. Shell, slated to import there, also has a deal to use the old Elba Island, Ga., facility, and wants to build its own Gulf of Mexico site.