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Saturday, March 21, 2009

Environment - "Natural Gas, Suddenly Abundant, Is Cheaper "

Here are earlier ILB entries on SB 423, the bill that puts the State into the coal-to-gas financing business. Specifically, the digest of the bill, now on its way to the Governor, reads:

Permits the Indiana finance authority (authority) to enter into contracts for the purchase and sale of substitute natural gas (SNG) from coal gasification facilities to regulated energy utilities for delivery to retail end use customers. Requires the authority to establish the substitute natural gas account to provide funding for SNG related business.
From a March 13th story by Mark Wilson in the Evansville Courier & Press:
Developer William Rosenberg said the plant will be able to provide the gas at a cost less than the market price of natural gas over the long run.

However, special legislation is required to do so, because negotiations with several utilities to lock in a 30-year contract to purchase the gas fell through last year. Such long-term purchase agreements are necessary to qualify for federal loan guarantees that would make funding of the plant possible, Rosenberg said.

Although natural gas prices currently are low, Rosenberg said Thursday that prices are expected to rise over the next 30 years while the supply from within the United States is expected to decrease. The price of coal is expected to stay relatively stable, with much less of an increase over time.

A recent forecast by the federal Energy Information Administration predicts the price of natural gas to reach $9.25 per million Btu by 2030. The report also is expecting demand for natural gas to increase sharply during that time, supplying most of the additional electric generating capacity added by 2030.

"No one believes they (natural gas prices) are going to stay where they are today," Rosenberg said.

He suggested if the plant was operating now, it would be able to produce 16 percent to 20 percent of Indiana's natural gas needs.

But with utilities unwilling to commit to a long-term purchasing agreement, legislators drafted a bill that will allow the Indiana Finance Authority to act as a go-between for the plant and utilities.

With that in mind, I read this story in today's NY Times, written by Clifford Krauss, and headed "Natural Gas, Suddenly Abundant, Is Cheaper ." Some quotes:
HOUSTON — The decline in crude oil prices gets all the headlines, but the first globalized natural gas glut in history is driving an even more drastic collapse in the cost of gas that cooks food, heats homes and runs factories in the United States and many other countries.

Six giant plants capable of cooling and liquefying gas for export are due to come on line this year just as the economies of the Asian and European countries that import the most gas to run their industries are slowing.

Energy experts and company executives say that means loads of gas from Qatar, Egypt, Nigeria and Algeria that otherwise would be going to Japan, Korea, Taiwan and Spain are beginning to arrive in supertankers in the United States, even though there is a gas glut here, too.

With industrial and utility use of natural gas declining, gas prices in the United States have already declined by two-thirds since the summer. Prices are not likely to go down much more, experts say, but an increase in imports is likely to keep them low until the global economy recovers and drives demand back up. * * *

Natural gas is becoming a world commodity like oil. It is still loosely connected to world oil benchmark prices and its price, usually set by longer-term contracts everywhere except for the United States and Britain, can diverge widely from one continent to another. Until the last few years, liquefied natural gas was a high-priced necessity for countries that did not produce their own gas supplies or have access to piped reserves; but it now has become a cheap economic driver for countries like Japan with few energy resources.

But as more terminals have been built, the amount of gas that is shipped from one continent to another in giant tankers has climbed. And now the emergence of the global market in gas is about to take a giant leap.

The global capacity for liquefied natural gas exports of 200 million tons a year will increase by 25 percent with the completion of six new plants in Qatar, Russia, Indonesia and Yemen, totaling $48 billion in investments, and the upgrading of a seventh plant in Malaysia. National energy companies in those countries, assisted by ExxonMobil, Total, BP and Shell, rushed construction of those projects in recent years to satisfy the mushrooming appetite for energy around the world. More large plants are due on line in 2010 and 2011. * * *

The international gas glut and expected surge in gas imports represent a reversal from trends of less than a year ago when the world suffered a shortage of liquefied gas and prices spiked in the United States and elsewhere.

Natural gas in the United States costs a little over $4 per thousand cubic feet, down from a peak of more than $13 last year. Oil now costs a bit more than $51 a barrel, down from a peak of more than $145 in July. On average, world spot prices for liquefied natural gas cargoes have come down by more than two-thirds since last summer.

Posted by Marcia Oddi on March 21, 2009 05:20 PM
Posted to Environment