SOURCE: Zeus Development Corporation

Zeus Development Corporation

December 04, 2012 10:05 ET

U.S. in Need of LNG Capacity Additions, Zeus Analysis Finds

HOUSTON, TX--(Marketwire - Dec 4, 2012) - According to latest Department of Energy data published Dec. 3, the U.S. imported 62 LNG cargos in the first ten months of 2012. The cargos were obtained from world markets where prices are up to three times higher than the U.S. The U.S. NYMEX market closed at $3.70/MMBtu on Dec. 3, while Europe's Zeebrugge gas market closed at $10.50/MMBtu. Meanwhile, Asian prices have been trading even higher at more than $13/MMBtu.

"U.S. LNG producers have an opportunity to liquefy low cost domestic gas to fill the demand met by these imported cargos," said Bob Nimocks, president of Zeus Development Corporation. "The challenge is liquefaction capacity."

According to a Zeus survey, 34 U.S. plants can produce about 2 million gallons of LNG daily. Yet, half is needed for local pipeline balancing, what the industry calls "peakshaving." The other half is being sold by tanker truck to growing U.S. transportation and industrial markets.

These markets outbid importers because without LNG they would have to rely upon even higher priced petroleum fuels, such as distillate, which sell for about $22/MMBtu. In some regions, such as New England, demand for LNG has risen sharply. The largest supplier, Distrigas of Massachusetts, however, must import its LNG via tanker ship from Trinidad. In recent years, Trinidad has been selling more cargos to Asia.

Rising demand for transportation and industrial fuel combined with penned up demand from importers is spurring new liquefaction projects in North America. At least 20 projects have been announced. Yet, in total, they will add just 2 million gallons per day to domestic supply. LNG imports thus far in 2012 have averaged 6 million gallons per day.

"Some regional markets are tightening as transportation and industry demand grows," Tom Campbell, Zeus LNG fuel analysts and coauthor of a report, said. "Efforts by such firms as Clean Energy Fuels, Encana and Shell to market more LNG to transportation and industry is increasing demand faster than capacity can keep up."

On Dec. 13, Zeus will present summary analysis to the North American LNG Fuel Supply Seminar at the Houston Magnolia Hotel. The Seminar features presentations on 11 LNG capacity expansion projects in varying stages of development. More information online at http://www.zeusintel.com/ZeusEvents/LNGFS2012.aspx.

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