Global Gas — Oversupply and Uncertain Future

Abstract

SHOULD GAS STAY AT HOME? As recently as 2005-2007, North America was seen as threatened by major and enduring gas shortage. Prices were expected to stay as high as, or exceed present European gas import prices, typically $10 $12 per million BTU (July 2013) for pipeline gas, and often more than that for LNG imports. Asian LNG gas import prices for certain markets, especially Japan, can presently attain more than $15 per million BTU pricing this energy at close to $35 per 1000 kWh (MWh). Electricity produced from gas at this price will have a generating-fuel-only cost of around or above $70 per 1000 kWh. For September delivery, early August prices of US natural gas contracts traded on the Nymex are currently priced around $3.45 per million BTU. In 2005-2007 major investment was underway in the US to build terminals to import LNG, not to ship it overseas. Today, converting import terminals into export terminals, and building new LNG export terminals at typical costs ranging from $10 to $20 billion each, is the major planned or projected gas infrastructure program underway in the US and Canada. Due to the turnaround being recent, the high costs, and regulatory requirements including energy policy and environmental concerns, the US government has to date only approved two projects for LNG exports. Debate rages in Washington over whether to allow more, with calls for no or low exports from the USA coming from consumer groups and major industrial gas and energy users, such as Dow Chemical, who say the gas should stay on the continent to ensure cheap energy for domestic manufacturing and consumers.