LNG producers to hold discussion with Bush administration

OPEC ministers and officials from other major energy producing countries will meet with the Bush administration this week to discuss the growing U.S. thirst for imports of liquefied natural gas (LNG) to fuel electric utilities and manufacturing.

With U.S. natural gas production unable to keep up with domestic demand, more imports of the super-cooled gas will be needed over the next two decades to fill the growing gap.

The Bush administration invited 24 energy ministers from around the world to a two-day conference beginning Wednesday to address the supply shortfall.

Saudi Arabian oil minister Ali al-Naimi and six other OPEC members are expected to attend, making it the largest gathering of cartel ministers in Washington in recent memory. Ministers from OPEC members Venezuela, Nigeria, Indonesia, United Arab Emirates and Algeria, as well as cartel President Abdullah al-Attiyah of Qatar, are also expected.

Non-OPEC nations invited to the meeting that are major U.S. energy suppliers, or have the potential to be, include: Russia, Mexico, Canada, Norway, Trinidad, Brazil, Argentina and Australia.

The ministers will discuss global gas resources, existing and proposed LNG supply projects, import and export terminals, transportation routes to North America, safety and security issues, and barriers to investment in the LNG market.

Many companies in the chemical sector, which uses gas to produce everything from plastics to fertilizer, have cut output because of high plant fuel prices. Some have moved production to countries like Trinidad, where gas is cheap and abundant.

Some 30 proposals have been unveiled in recent months to build LNG terminals to serve the U.S. market. Several energy analysts say LNG could meet about 10 percent of total U.S. gas needs by 2010 -- up from about 2 percent today.

Currently, there are four LNG receiving terminals in Massachusetts, Maryland, Georgia and Louisiana.

Not all analysts are convinced LNG will significantly boost its share of the overall U.S. gas market.

In its long-term energy forecast released on Tuesday, the Energy Information Administration said U.S. LNG imports should grow from this year's 540 billion cubic feet (Bcf) to 4.8 trillion cubic feet (Tcf) in 2025, more than double its forecast from last year.

LNG imports will meet 15 percent of America's gas demand in 2025, as gas use is expected to rise from 22.8 Tcf last year to 31.4 Tcf in 2025, the Energy Department's analytical arm said.

LNG is natural gas treated for transportation aboard special tankers. Gas cooled to minus 259 degrees Fahrenheit (minus 162 Celsius) changes into liquid and shrinks to less than 1/600 of its original volume.

Once it arrives at a U.S. terminal, LNG is returned to a gaseous state and fed into existing natural gas pipelines.

Algeria was historically the largest LNG supplier to the U.S. market, but in 2000 it was surpassed by Trinidad and Tobago, which provides 66 percent of the nation's LNG imports.

Environmental and consumer groups have expressed concerns about the dozens of LNG terminals proposed to be built in the United States, citing fears LNG tankers could explode and are at the risk of sabotage.

The LNG conference will also give U.S. Energy Secretary Spencer Abraham an opportunity to meet with the OPEC ministers following their Dec. 4 meeting in Vienna, where the cartel decided to leave their oil production levels unchanged. OPEC will meet again in early February and likely reduce its output, according to oil market analysts.

Abraham has said the growing U.S. economy will result in more oil demand during the second half of next year, not the decline that OPEC ministers are forecasting.

In any meetings with the OPEC ministers, Abraham would be able to press that point and the Bush administration's concerns that the cartel's policies should not be affected by a weaker U.S. dollar, which reduces the purchasing power of oil priced in dollars.(*)