Re: SC28

http://www.energybulletin.net/21849.html

If we build it, will they come?

The "we" refers to North America. The "it" refers to liquified natural gas (LNG) ports. And, the "they" refers to LNG tankers from exporting countries. Unfortunately, the answer to the question is "probably not," at least not in the numbers we would like them to come, according the energy investment banker Matt Simmons and resource economist Douglas Reynolds, both of whom attended the recent Association for the Study of Peak Oil & Gas - USA conference in Boston.

Surprisingly, governments, industry and the public continue to behave as if they were members of a cargo cult confident that enough LNG ships will arrive to avert a disaster. Unfortunately, the facts don't support their optimism. Exactly one new LNG port has been completed in North America since the 1970s. That makes only five total. Some 17 are in the planning and approval stages; but perhaps more telling is the fact that at least 11 others have been cancelled. The completion dates for those that survive cancellation are in many cases years away. Given the rising demand for natural gas and the obvious plateauing of supply in North America, how can it be that more ports aren't being built (not just planned) and quickly?......

........Add to that the fact that most of the natural gas available for export via LNG tanker is found in the Middle East, an area not particularly known for its stability. And, even though the world's largest gas reserves are found in Russia, this should provide little comfort to those living in North America. The Russians recently decided to scrap a project that would have sent LNG to the United States in favor of sending the gas through pipelines to Europe.

The increasing competition for natural gas worldwide may leave North Americans without reliable LNG supplies. Indonesia announced earlier this year that as of 2010, it would keep more of its own gas for domestic use and decrease the amount going to Japan. That means that Japan will be bidding on the remaining available export supplies of LNG after that date. This development also highlights the possibility that projections of what will be available for export in the next decade may not meet expectations since countries which currently export will use more of their own gas........

............Two worrisome developments, however, imply an earlier peak, perhaps much earlier. First, 80 percent of Russia's production comes from three giant fields, all of which are in decline, Simmons explained. Second, according to Reynolds, a peak in natural gas worldwide may be caused as much by political factors as geological ones.................

...............Meanwhile, in North America Simmons said that a single cold winter could create an immediate crisis not only for home heating and industrial feedstocks, but also for electricity which is increasingly generated by natural gas fired plants.

But, perhaps even more disturbing, Reynolds believes that natural gas production declines in North America which have been gentle so far will ramp up to perhaps 5 percent annually starting in 2007 or 2008 and create a natural gas cliff. That in itself could cause a crisis even without a cold winter. But a combination of the two would be truly devastating.

Unfortunately for residents of North America, LNG imports will have little cushioning effect if a natural gas cliff arrives this coming winter or within the next several years. For that reason it is truly puzzling that no one in government is talking about the one option left: a massive conservation effort to buy us some time. The only thing that can explain such obliviousness is that cargo cult thinking continues to overpower all the warnings that are now in plain view..................