It's nigh impossible these days to get a port terminal built in the U.S. that will accept liquefied natural gas. LNG is natural gas that's been cooled to -260 degrees Fahrenheit and shipped to the U.S. in 1,000-foot doubled-hulled tankers to be warmed onshore to its gaseous state. LNG ships are not pretty to look at. The terminals are dangerous — in January an LNG plant explosion in Algeria killed 27 people.
All of which makes a British company called BG Group look pretty smart. In the early 1990s the company had the foresight to charter four of the five LNG ships then available, giving it the ability to bid on capacity at the existing U.S. terminals. The $4.7 billion (sales) gas company now owns 100 percent capacity at two of the four existing U.S. terminals, in Louisiana and Georgia, giving it pole position against much larger competitors like ExxonMobil and ChevronTexaco in the race to serve the U.S. market.
BG handles not quite two-thirds of LNG imports into the U.S., yielding it estimated revenue of $157 million. That means it is delivering 1 percent of the country's natural gas, according to Martin Houston, who heads the company's LNG operations. "Obviously, we're trying to increase that," he says.
U.S. and Canadian production from gas reserves has plateaued, but there are 5,500 trillion cubic feet of proven reserves worldwide in resource-rich countries like Qatar and Algeria, some of which could be converted into LNG. Estimates have LNG imports increasing from 2003's 540 billion cubic feet to 2.2 trillion cubic feet in 2010, accounting for 8.5 percent of U.S. natural gas consumption.
Liquefied gas even has the blessing of some environmental groups. In a recent analysis the Natural Resources Defense Council said that with "careful siting, the greater price stability that LNG offers could help avoid increased reliance on dirtier fuels."
But there's a NIMBY problem — nobody wants one of these scary terminals in his back yard. In January ExxonMobil put on hold plans for an LNG terminal in Alabama's Mobile Bay, citing community opposition that included Governor Bob Riley. In November Boston Mayor Thomas Menino demanded a ban on LNG ships in the harbor because of safety concerns.
Facing such resistance, companies are exploring outside the U.S., in places like Baja California, which could serve the West Coast. The Bahamas are another option; a pipeline could be built to Florida. Offshore terminals are yet another possibility being explored by companies like ChevronTexaco. Yet this is potentially expensive and may do little to ameliorate safety concerns. A Morgan Stanley report notes that partially unloaded LNG tankers are less stable than fully loaded ones.
There are now some 30 proposals for terminals to serve the U.S., a $25 billion market that could increase 70 percent by 2007 according to the Morgan Stanley report. But given the opposition and the complexity of the process, maybe four will be built over the next several years. Meanwhile, BG is cooking with gas.