New York - US demand for natural gas will be strong enough in the future to support both a planned pipeline to bring Alaskan gas to the lower 48 states and the many liquefied natural gas import terminals that will be built, a top federal energy regulator said on Wednesday.
The Federal Energy Regulatory Commission has approved several LNG imports terminals and dozens more have been proposed. At the same time, a coalition of large energy companies is trying to work out the terms for building a huge natural gas pipeline in Alaska to supply the US mainland.
The US market will be able to absorb the expected boost in available gas from the two supply streams, according to FERC Commissioner Nora Brownell.
"There's room for both" because US gas demand will also increase and prices will be high enough to make the projects profitable, Brownell said at the Reuters Global Energy Summit in New York.
However, she said "there's just no way" all the proposed LNG terminals will be built, not due to competition from the Alaskan pipeline, but because there will not be enough LNG imported to support them.
"I don't know what the magic number is," Brownell said. "I think the market will dictate what gets built and what doesn't."
LNG currently accounts for about 2 percent of US natural gas supplies but imports are growing and could meet about 10 percent of total US gas needs by 2010, according to government estimates.
The expected jump in LNG imports reflects the growing gap between domestic gas production and future growth in demand, especially from new power plants that are mostly fueled by natural gas.
The proposed US$20 billion Alaska pipeline will also be needed to help meet some of that gas demand, Brownell said.
The 3,500-mile pipeline would take 10 years to build and transport around 4 billion cubic feet of gas a day. Alaska holds an estimated 35 trillion cubic feet of natural gas reserves.
Brownell said the FERC has assembled a team of staff ready to handle the application for the pipeline once it is filed with the agency after the companies reach a final deal on the project with Alaska's state government.
Even though Congress instructed the Energy Department to administer the program for providing up to US$18 billion in government loan repayment guarantees to build the pipeline, Brownell said she does not think the companies are acting too greedy in trying to get even better financial terms from Alaska before going forward with the project.
In order to secure a deal, the pipeline's operators -- Exxon Mobil, BP and ConocoPhillips, want assurances from Alaska for a set of state oil and gas tax rates that won't change for three or four decades in order to mitigate some of the financial risk of the project.
"They're acting naturally as a business," Brownell said. "Sometimes big companies can act in ways that look rather thug-like. I think they're good negotiators and they're doing what they do as companies."
Brownell said she believes the pipeline will eventually be built because it makes economic sense to do so as US natural gas demand and gas prices will be strong for the foreseeable future.
Story by Tom Doggett
REUTERS NEWS SERVICE
