US LNG Prospects Unlikely To Be Dimmed By Algeria Blast
biz.yahoo.com
Wednesday January 21, 5:30 pm ET
By Spencer Jakab, Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--The worst accident at a liquefied natural gas facility in 30 years Tuesday in Algeria seems to have done almost nothing to dim expectations of a surge in use of the fuel in the U.S. in coming decades.
U.S. LNG imports to the country's four existing facilities, all built decades ago, roughly doubled during 2003, and use of the fuel is expected to quintuple in a little more than a decade, according to forecasts by the industry. With dozens of facilities in the planning or approval stage, foes of the plants may face an uphill battle pointing to the accident in Algeria in their arguments against placing receiving terminals near populated areas.
"All the advocates for safety and regulation will put that in their back pocket as a card they can use, but as far as the markets in general, they didn't take it as having any impact," said Ben Smith, who follows LNG at natural gas analysis firm Enercast.com. Indeed, one of the most aggressive players in the field, Cheniere Energy , has seen its shares rise by over 10% in the two days since the accident.
Gavin Law, head of LNG at oil and gas consulting firm Wood Mackenzie, said it's still unclear whether the explosion that caused 23 deaths and 74 injuries and destroyed a large part of Algeria's second largest LNG facility was the result of human error or other technical problems.
"It's hard to say whether it's a legitimate problem with LNG or a failure to follow the proper safety precautions," he said. Like Smith, he thinks safety advocates will be able to use the issue. "I'm sure it will be picked up - it's LNG related, it's an explosion," he said.
But Law points out that the safety record of the LNG industry has been excellent. "The overall track record is pretty phenomenal."
Nonetheless, LNG experts in the U.S. feel the explosion adds to safety concerns that will impact the development of the U.S. market. "It does have an effect, let's face it," said Jerold Levey, vice president for commodities at Societe Generale in New York. But he feels that facilities may simply be shifted to less populated areas and that the industry's expansion prospects are unchanged.
"People are very conscious of this, and therefore these things are going to get built where nobody lives," he said.
Beyond safety issues, Law sees some impact on the development of the U.S. LNG market as a result of the accident. He points out that, until recently, developers had imagined the U.S. could supply itself with a high proportion of spot shipments rather than long-term supply deals more typical of the industry.
"Things like the Algeria fire highlight the fact that you're exposed if you don't have a long-term agreement," he said.
In terms of immediate consequences for the U.S. market, he said there may be some small, residual impact at the Lake Charles facility which imports some Algerian spot cargoes, although not from the facility in question. The accident may also tighten the European market, though Law pointed out the 2.8 million tons per annum of capacity knocked out at the facility roughly equaled its surplus capacity in 2003.
A great deal of new capacity is coming onstream in 2005 and 2006, and there are no fundamental supply problems as far as LNG capacity is concerned in the long run, Law said.
"Long-term there's more than enough," he said.
-By Spencer Jakab, Dow Jones Newswires; 201-938-4377; spencer.jakab@dowjones.com |
