By Kurt Cobb -- Resource Insights
Oct. 31, 2006 -- 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?
Matt Simmons thinks he has part of the answer. Simmons, who has freed himself from the day-to-day chores of running his eponymous investment bank, said he spends most of his time poring over energy data and news. During an impromptu question and answer session between presentations at the Boston conference, he laid out the problem with LNG imports.
He explained that the exploration arms of oil and gas companies are not spending money on the needed appraisal wells in countries with large natural gas reserves such as Qatar. This is in part because such wells have become very costly as prices for everything related to drilling and exploration have gone through the roof. The result is that financing -- which can reach into the hundreds of millions for a single LNG port -- has been hard to line up. Investors want to know that there will be a reliable supply for decades for their LNG port. Simmons believes there simply isn't enough information to assure many potential investors.
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