The Global LNG Gamble

The Geopolitical Risks of LNG

To many energy-industry analysts, 2005 is a make-or-break year for the U.S. gas market. If we don't have at least several liquefied natural gas (LNG) terminals in construction by the end of the year, the country arguably will face serious gas-supply shortages and price spikes beginning in about 2008.¹

"The North American markets are now dependent on the growth of liquefied natural gas," says Michael Zenker, a senior director with Cambridge Energy Research Associates (CERA) in Boston. "If we don't get LNG, we don't have a plan B."

Facing such a situation, the gas industry is working feverishly to develop LNG-import terminals and regasification facilities on every North American seacoast. Development moved slowly in 2003 and 2004, and alarm bells were sounded in policy circles, most memorably due to Federal Reserve Chairman Alan Greenspan's address before the Senate Energy Committee in 2003. Soon thereafter, the federal government took action:

The Federal Energy Regulatory Commission (FERC) and the U.S. Coast Guard streamlined licensing and permitting processes;

FERC eliminated "open-season" requirements to give developers clearer incentive to invest in LNG terminals, and asserted its authority over facility siting;

The Department of Energy commissioned studies to analyze the risk of an LNG spill and formulate baseline science models to facilitate decisions regarding siting, design and permitting; and