The economic rationale behind North American LNG projects is being called into question amid falling gas and crude prices, but the leader of Veresen Inc., the company behind the planned Jordan Cove LNG project in Oregon, says he’s confident that his investment will not go to waste.
“I get asked a lot nowadays if the low crude prices will have an impact on our project,” said President and CEO Don Althoff. “I don’t believe it will. I believe our buyers take a long-term view of the marketplace. There’s a four-year construction cycle and a 20-year contract. Buyers are thinking about 25 years out, really, when they think about pricing.”
The supporters of LNG projects find comfort in the predictions of the U.S. Energy Information Administration (EIA) which said that the nation’s shale gas plays will continue to produce enough natural gas to meet American need and provide sufficient supply for export through 2040 and beyond. However, other studies, including a detailed effort at the Bureau of Economic Geology at the University of Texas, suggest the nation’s four major shale gas plays will peak in 2020, and then drop off.
“Does the U.S. have enough natural gas to even consider export?” Art Berman, a petroleum industry analyst told the World. “That’s the most important consideration.”
The proposed Jordan Cove facility would consist of two full containment storage tanks, each with a capacity of 160,000 cubic metres (5,650,347 cu ft). It would have a single marine berth for loading liquefied natural gas and a dedicated tractor tug dock. Natural gas would be transported to the Jordan Cove liquefaction terminal by the 234-mile long Pacific Connector Gas Pipeline heading from Coos Bay southeast to Malin, Oregon.
According to Althoff, one of Jordan Cove’s main advantages is its proximity to Asian markets – especially Japan, which after closing nuclear facilities after the Fukushima disaster became heavily reliant on imported LNG. Another, is the fact that – unlike many other LNG plants, dependant on supplies from the maturing shale plays in Texas, the Southeast and the Appalachian region – Jordan Cove’s supplies are to come from smaller fields in Colorado and Canada that natural gas buyers don’t see as a huge risk.
This certainly puts Jordan Cove in a better position than some other projects, but will it be enough to save the terminal from being scrapped?
Energy Intelligence Group, an energy industry analytics company, which ranked 23 LNG export projects in the U.S. according to their chances of success, saw Jordan Cove as a “wild card” because “project sponsors could lose interest through changes in broader global strategy or because of opposition in Oregon.”
What’s more, in its report, the Group, predicted that some LNG project will not come online due to oversupply.
“Four are all but guaranteed to go ahead, and two more are likely — and these six front-runners alone would add more than 70 million tons per year to global LNG supply by late this decade or early next,” Energy Intelligence wrote.
Those six “front-runners” are Sabine Pass LNG trains 1-4 in Louisiana, Cameron LNG in Louisiana, Freeport LNG in Texas, Cove Point in Maryland, Corpus Christi LNG in Texas and Sabine Pass trains 5 and 6.
When asked about the EIG’s predictions, Althoff brushed them aside: “I read the studies. They’re interesting, but I usually find some flaws,” he said.
“We know we can build this plant competitively with any plant being built in the world. I’m not worried about it going forward,” Althoff said. “It’s in a great location and a lot of the infrastructure is already built out with the long-haul pipes out of Canada and the Rockies. Coos Bay is a great harbor and it’s close to the market.
“That’s why this plant will get built and a lot won’t. It’s just in the right place at the right time. It also comes online in the right time; buyers are looking to buy product in 2019 and 2020.”
Source: The World
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