Why the US imports LNG despite its gas exports boom
January 07 2019 09:52 PM
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An LNG carrier
An LNG carrier sits docked at the Cheniere Energy terminal in this aerial photograph taken over Sabine Pass, Texas (file). US gas production jumped 12% in 2018 to a record 89.6bn cubic feet a day while consumption was 81.7bn cubic feet per day, according to the US Energy Information Administration.

By Naureen S Malik/New York

More than a decade in and the US shale boom keeps breaking output records, with fields from Pennsylvania to Texas producing more natural gas than the country needs. That has triggered billions of dollars of investments to ship liquefied natural gas overseas. Yet the US is still importing LNG from places such as Russia and Nigeria. There are two reasons for that: Pipeline bottlenecks and the requirements of a 1920 law meant to support a robust US shipping industry.


1. Does the US consume more gas than it produces?
No. Gas production jumped 12% in 2018 to a record 89.6bn cubic feet a day while consumption was 81.7bn cubic feet per day, according to the US Energy Information Administration. The problem is getting it to the right places at the right time because of insufficient pipeline capacity near big metropolitan centres. Pipelines historically have been designed to operate at a reduced rate for most of the year so that when a cold snap hits, there’s space for a surge in demand. But with the shale boom, many households, power plants and factories have switched from fuels such as heating oil and coal to take advantage of cheap gas. This added consumption means that some lines are close to full year-round and are thus unable to cope when demand peaks.


2. Where are shortages 
occurring?
Mostly in the northeast. The region was the destination of most of the 200mn cubic feet a day of LNG the US imported in the first 10 months of 2018. In January 2018, frigid weather sent New York City spot gas to a whopping $175 per million British thermal units, compared with less than $3 elsewhere in the country, as gas distributors engaged in bidding wars for pipeline space.


3. Why can’t the US buy its own LNG?
There’s certainly lots of it. Surplus US gas supply allowed America’s booming LNG industry to ship 2.8bn cubic feet a day to overseas markets during the first 10 months of 2018, according to the EIA. But while the US is poised to become the world’s third largest LNG supplier by 2020, with six export facilities, the Jones Act of 1920 mandates that vessels moving between US ports be built and registered in the country, and crewed by Americans. 
There are currently no US-flagged LNG carriers.


4. Where is imported LNG coming from?
Everett terminal in Massachusetts, by far the most active of the dozen import terminals in the US, received about two dozen cargoes in 2018, with all but one apparently coming from Trinidad and Tobago, according to Energy Department and ship- tracking data compiled by Bloomberg. Russian LNG made its debut in the US in January of last year as prices climbed during freezing temperatures. Dominion Energy Inc’s Cove Point terminal in Maryland imported a cargo from Nigeria in late December.



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