LNG is more expensive than domestically produced natural gas
When asked whether there was a need for LNG in Oregon the simple answer of the Oregon Department of Energy (ODOE) was "no." ODOE's report was based on two key facts that LNG proponents would like to ignore despite clear evidence to the contrary. First, foreign LNG costs more than domestic and Canadian gas supplies Oregon currently relies on. Second, new natural gas discoveries in the United States could supply 118 years of U.S. demand while avoiding reliance on gas from Russia, Iran and Qatar: the three countries with the world's largest gas reserves.
LNG is more expensive than domestic gas
LNG has for over three decades been significantly more expensive than domestic natural gas and this is why the handful of existing U.S. LNG import terminals have either been mothballed or are operating at less than half capacity for decades since they were built. At the end of September 2008, LNG in the Pacific Rim market, that Oregon would have to compete in, was selling for 400% more than natural gas form the Rockies, where Oregon currently gets much of its gas supply.
Due to the high price of LNG and major new discoveries of domestic gas, the U.S. LNG market crashed in 2008, highlighting both the high price and unreliability of LNG as a source of gas. For example:
- U.S. LNG imports have dropped by over 60% in 2008 as LNG producers have diverted LNG from the U.S. to the more expensive Pacific Rim and European markets. The Northwest Natural Gas Association has acknowledged this reality explaining that "the U.S. will have to compete on price with Asian and European markets or else watch LNG cargos get diverted to foreign parts." Competing on price with these markets, however, would result in significantly increased gas prices for customers.
- Unable to sell expensive LNG in the U.S. market, both the Freeport and Sabine Pass LNG import terminals in Texas applied in September 2008 to export LNG they already imported;
- British Columbia's Kitimat LNG project that was permitted as an import terminal in October 2008 applied to become and export terminal to sell low-priced North American gas to the high-priced Japanese and Pacific Rim market; A recently proposed second LNG export terminal from British Columbia highlights both the availability of growing Northwest gas supplies and the high price of LNG.
- The newest LNG terminal in the U.S., Cheniere's Sabine Pass terminal in Texas, is on the verge of bankruptcy due to high LNG prices and low LNG imports;
- BP recently decided to suspend plans for an east coast LNG import terminal because of high LNG prices.
Why is LNG so expensive?
- It is very energy intensive and expensive to liquefy natural gas, ship it in tankers across the ocean, and the heat it up to re-gasify it from liquid to gas.
- LNG importing countries like Japan, which Oregon would be directly competing with for LNG supplies, have little to no domestic gas supplies and have no choice but to be the highest bidder to feed their domestic gas demand.
Recent News:
Natural Gas Rate Cut May Doom LNG
July 10th, 2009
Russia, Iran, and Qatar create new natural gas cartel that will make LNG even more expensive
Russia, Iran, and Qatar, which together have 60% of the global natural gas reserves, recently formed a natural gas cartel along with other major gas producing countries called the Gas Exporting Countries Forum which would function like OPEC as a tool for keeping gas export prices for LNG and pipeline exports high. LNG proponents like to point to Australia and other minor LNG producers as potentially acceptable sources of Oregon's LNG supply. There is no factual basis for the claim that Oregon could become an LNG importer without heavy reliance on countries such as Russia and Iran which have the largest natural gas reserves.
Myth that LNG Price will Decrease
LNG promoters have argued that new supplies of LNG will significantly drive down the price of LNG. This is just speculation. First, LNG has been more expensive than domestic gas for 30 years. Second, none of the LNG projects planned for Oregon have identified any sources of LNG or have options to purchase LNG. Many new LNG export facilities, such as the world's largest now being planned for Sakalin Russia, are already fully contracted and global LNG demand is continuing to grow as developing countries, like China, which has plans for ten new LNG import terminals, increase their consumption of natural gas.
