According to latest Department of Energy data published December 3, the United States imported 62 LNG cargos in the first 10 months of 2012. The cargos were obtained from world markets where prices are up to three times higher than the United States. The US NYMEX market closed at $3.70/MMBtu on December 3, while Europe's Zeebrugge gas market closed at $10.50/MMBtu. Meanwhile, Asian prices have been trading even higher at more than $13/MMBtu.
"US LNG producers have an opportunity to liquefy low cost domestic gas to fill the demand met by these imported cargos," says Bob Nimocks, president of Zeus Development Corporation. "The challenge is liquefaction capacity."
According to a Zeus survey, 34 US plants can produce about 2 million gallons of LNG daily. Yet, half is needed for local pipeline balancing, what the industry calls "peakshaving." The other half is being sold and distributed by tanker truck to growing US transportation and industrial markets.
These markets outbid importers because without LNG they would have to rely upon even higher priced petroleum fuels, such as distillate, which sell for about $22/MMBtu. In some regions, such as New England, demand for LNG has risen sharply. The largest supplier, Distrigas of Massachusetts, however, must import its LNG via tanker ship from Trinidad. In recent years, Trinidad has been selling more cargos to Asia.
Rising demand for transportation and industrial fuel combined with pent up demand from importers is spurring new liquefaction projects in North America. At least 20 projects have been announced. Yet, in total, they will add just 2 million gallons per day to domestic supply. LNG imports thus far in 2012 have averaged 6 million gallons per day.
"Some regional markets are tightening as transportation and industry demand grows," Tom Campbell, Zeus LNG fuel analysts and coauthor of a report, said. "Efforts by such firms as Clean Energy Fuels, Encana, and Shell to market more LNG to transportation and industry is increasing demand faster than capacity can keep up."
On December 13, Zeus will present summary analysis to the North American LNG Fuel Supply Seminar at the Houston (TX) Magnolia Hotel. The Seminar features presentations on 11 LNG capacity expansion projects in varying stages of development. More information online at http://www.zeusintel.com/ZeusEvents/LNGFS2012.aspx.