The Center for Liquefied Natural Gas: Winter Fuels Outlook Shows No Time for Complacency about LNG

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With the release of the U.S. Department of Energy’s (DOE) Winter Fuels Outlook, the Center for Liquefied Natural Gas (CLNG) urges that the public not be lulled into a false sense of energy security and underscores the need for LNG.

Although today’s release of the U.S. Department of Energy’s (DOE) Winter Fuels Outlook projects that natural gas prices this winter will be lower than those of last winter, the Center for Liquefied Natural Gas urges that the public not be lulled into a false sense of energy security and underscores the need for LNG.

The DOE’s Energy Information Administration’s (EIA) Outlook predicts that under the baseline weather case, residential natural gas prices are expected to average $12.23 per thousand cubic feet (mcf) compared to $14.64 per mcf last year. The baseline weather case projected by the National Oceanic Atmospheric Administration forecasts that winter in the lower-48 states will be 5.9 percent colder compared to last winter, but 2.1 percent warmer than normal.    

If you compare this year’s projections historical data as recent as five years ago, the picture is not so rosy. Prices are high, and all things point to them continuing to rise. Between October 2001 and March 2002, the average residential price was $7.54 per mcf. Ten years ago, between October 1996 and March 1997, the average price was $6.66 per mcf. That’s about a 13 percent increase from 1996 to 2001 and about a 62 percent increase from 2001 to 2006. The climb in prices year over year shows that we need more supply.

LNG production data shows that domestic production is limited and imports from are Canada decreasing. As a result, introducing more LNG into the nation’s natural gas supply is one of the most viable means of tempering prices and reducing spikes. According to the Outlook, LNG imports are expected to increase from their 2005 level of 630 bcf to 650 bcf in 2006 and to 920 bcf in 2007. But with only five facilities in the United States (and one in Puerto Rico) capable of receiving LNG, more LNG terminals must be built in order to meet demand and help moderate prices.

As production and consumption data shows, U.S. demand for natural gas is growing and outstripping supply in both the U.S. and Canada. Already, there is a 15 percent gap between natural gas production and consumption, according to DOE. By 2030, the DOE projects the gap to reach 21 percent.    

Natural gas makes up 22 percent of total energy consumption. Currently, only about 2.8 percent of the U.S. natural gas supply is LNG. DOE forecasts that LNG needs to make up 16 percent of the nation’s natural gas supply in 2030 in order to meet growing demand. By bringing in more LNG, and diversifying our sources of natural gas, America will meet its growing need for this important fuel.

Quotes from CLNG Executive Director Bill Cooper:

“It’s great news that prices will be lower than last year, but we can’t allow ourselves to become complacent about the cost of natural gas,” said Bill Cooper, executive director of CLNG. “We had an unusually mild winter last year which allowed us to put high amounts of natural gas in storage, and we’re expected to have a warmer-than-average winter this year. It’s not really surprising that prices are low. But to rely on the weather to be the mitigator of our supply and demand is a recipe for disaster.”    

“If we happen to have a cold winter this year, we’ll see higher natural gas prices because we’re in such a tight supply and demand balance,” said Cooper. “We are at the mercy of the weather, and that’s a dangerous place to be as we saw when Hurricanes Katrina and Rita knocked out much of the Gulf of Mexico’s natural gas production and prices spiked. To rely on one of the most unpredictable elements of the 21st century to determine whether we’ll be able to heat our homes and power our industries – that’s no way to run a railroad.”

“The fact remains that America still consumes more natural gas than it produces,” said Cooper. “Building more LNG receiving facilities around the country is the only way to bring in more natural gas and help close the gap, and mitigate the impact rising gas prices have on U.S. industry and the American consumer.”

About CLNG

CLNG is a coalition of 60 LNG producers, shippers, terminal operators and developers, energy trade associations and natural gas consumers. Its goal is to enhance public education and understanding about LNG by serving as a clearinghouse for LNG information.

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Breanne Reynolds
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