WSJ admits Greenspan was off base on LNG
New market analysis says demand for natural gas was just plain wrong
 
Thursday, February 12, 2009

http://www.dailyastorian.info/main.asp?SectionID=23&SubSectionID=392&ArticleID=58237&TM=7949.851


The Wall Street Journal is one of those venerable American institutions whose editorial page inflames liberals but whose reporting crew is generally considered among the most credible in U.S. financial journalism.

So when such an institution says "we were wrong on liquefied natural gas demand" it's time to sit up and read on.

That's exactly what happened this week when a Texas-based energy writer looked back on former Federal Reserve Chairman Alan Greenspan's take on LNG back in 2003, matched it with today's reality and found a pretty serious discrepancy.

Natural gas heats about half of U.S. homes and generates 20 percent of the nation's electricity, the newspaper reported. Recent price spikes, Greenspan told Congress in 2003, were the result of increased demand chasing limited U.S. supplies. To stabilize the market, Greenspan said the U.S. needed to become a major importer of LNG. Moreover, he added, "Access to world natural-gas supplies will require a major expansion of LNG terminal import capacity."

In part, this forceful comment from the federal government's leading financial expert helped spur pro-LNG forces. Locally here, one bulldozed its way through the Clatsop County Board of Commissioners and convinced the Federal Energy Regulatory Commission that its terminal was needed.

The message from Greenspan was clear: New facilities would have to be built in the U.S. to handle the expected surge in imports.

But now the WSJ says, "Mr. Greenspan and the industry experts who shared this view - and there were many - couldn't have been more wrong."

The Journal reported that within a year of Greenspan's testimony, FERC revealed there were plans for 40 new or expanded LNG terminals under consideration in North America. By 2005, that list had grown to 55.

"Today only six have been built, and most of those sit idle. Weeks pass between visits from a tanker full of frosty LNG," The Journal wrote. "Even before the economic slowdown, it was clear the nation had ample natural-gas supplies. Large-scale imports simply weren't needed. And new reports suggest the U.S. won't need to turn into a massive importer of natural gas anytime soon.

"How did the conventional wisdom get it so wrong?"

A considerable part of the argument for allowing LNG terminals to desecrate the Columbia River was demand and the lack of domestic sources to meet it.

But as new technology has allowed companies to tap more domestic supplies, industry analysts are now saying the U.S. is more self-sufficient than they thought.

The trend is reflected in the federal government's outlook on LNG, The Journal reported.

In December, the Energy Information Administration slashed its forecast of LNG imports expected by 2025 to a sixth of the projections made three years ago.

The Journal article's conclusion is worth reading in full:

"...North America is becoming a dumping ground for the world's excess natural gas. In 2009, new LNG supplies from Indonesia, Qatar, Russia and Yemen are expected to enter global markets, at a time when a depressed global economy has shrunk demand for fuel. ...

"LNG sellers will first fill up markets in Asia and Europe, which pay top prices. What's left over will likely head to underused terminals in North America. It's "the market of last resort," says Ira Joseph, an LNG analyst with PIRA Energy in New York.

"The bad news is that the LNG will arrive at a time when big users, such as the petrochemical and fertilizer industry, are cutting demand, and as even more domestic supply comes from the giant new unconventional wells.

"The result: Storage will fill up, and prices could crater."

The miscalculation has cost some companies dearly, but not before they built LNG facilities worth hundreds of millions of dollars with the approval of FERC.

The state of Oregon has argued the Bradwood Landing facility should not be approved until a needs analysis proves the imported fuel is needed.

Oregon Attorney General John Kroger made the case last week for using domestic natural gas instead of imported LNG.

Now the numbers are showing domestic sources could provide for Oregon's natural gas needs - at least until renewable energy sources are more fully developed.

Thus there is still time to do an about-face - in our case before more millions are spent - and bring this sorry chapter to a close.