Imports of liquid natural gas increase as inventories drop

Importing natural gas boosts supply but raises questions.
COVE POINT, Md. (AP) -- For the first time in nearly a quarter century, ships carrying liquefied natural gas will chug up the Chesapeake Bay next month to a massive unloading dock at Cove Point, one mile off the coast of Maryland.
When the odorless, icy-cold fluid arrives, Dominion Resources Inc., the company that runs the import facility, will store it in insulated onshore tanks and, eventually, warm it into a gas that can be piped to power plants, homeowners and other users. The natural gas was converted to its liquid state in other countries so it could be shipped by sea.
The amount of natural gas that enters the United States this way is tiny -- Cove Point is one of four such facilities in the country -- but LNG imports are on the rise as the industry scrambles to satisfy demand at a time when inventories are low and prices are high.
Great expectations
Analysts expect LNG imports to double in 2003 and potentially grow by 1,000 percent by the end of the decade, accounting for 11 percent of the country's total supply.
Even the most bullish predictions, however, are tempered by comments about formidable obstacles, including concerns about the environment, natural gas price volatility and national security.
"The surprise to the political system is that we're going to be importing yet another commodity from potentially unstable countries," Bob Ineson, head of the North American natural gas division at Cambridge Energy Research Associates in Houston, said. "I think people are going to have trouble with that."
Last week, Federal Reserve Chairman Alan Greenspan told members of the House Energy and Commerce Committee that, to mitigate future price spikes, the country needs to expand its LNG-import capacity.
Such high-profile advocacy notwithstanding, a rapid expansion of LNG imports is far from certain given the diversity of opponents:
ULawmakers from natural gas-producing states say energy independence is paramount to national security, arguing that the country's needs could be met through domestic production if not for stringent environmental regulations restricting access to public lands onshore and offshore.
UOther lawmakers concerned about national security in the wake of Sept. 11 say LNG ships cruising up and down the nation's coastline are vulnerable targets for terrorists.
UThe impact on local communities also comes into play, with LNG tanker traffic seen by some as a threat to public safety and health, as well as a drain on tourism in areas where fishing and boating are popular.
Along the Cheseapeake, the imminent arrival of LNG imports at Cove Point for the first time since 1980 arouses scorn from sport fishermen and charter fishing boat captains alike. That's because the U.S. Coast Guard plans to enforce a 500-yard buffer zone around Dominion's offshore dock, which for two decades had been one of the best places to catch striped bass.
Threats downplayed
Officials at Richmond, Va.-based Dominion say the heightened security is important in the current environment though they downplay the threats posed by LNG imports, which started roughly 30 years ago.
Dominion said no formal timetable for deliveries has been set, but that regular shipments are expected once the terminal is ready for imports at the end of July. Capacity at the Cove Point facility, which can store 5 billion cubic feet of LNG and turn as much as 1 billion cubic feet into gas in a day, is fully contracted for the next 20 years by BP, Shell and Statoil, a Norwegian oil giant.
Just how much LNG is sent from around the world to Cove Point and the other U.S. terminals located in Elba Island, Ga.; Lake Charles, La.; and Everett, Mass., will be decided almost entirely by price. Depending on how far the LNG has to be shipped -- export terminals are as close as Trinidad and as far away as Nigeria -- domestic prices between $3 and $4 per 1,000 cubic feet are generally considered high enough to spur imports, analysts said.