The fall in natural-gas prices is something that has hit Wyoming hard — resulting in state government having to cut back as prices dropped below projections. However, low natural-gas prices are strictly an American phenomenon.
Prices at the Henry Hub, for example, are just $2.30 per million BTUs, while prices in Japan — the world’s largest consumer of natural gas — are above $15 per million BTUs. Prices elsewhere in the world range from $11.40 in Europe to $14.50 in Australia.
Given high natural gas prices in Europe and elsewhere, Gov. Matt Mead said yesterday in a press conference, "I think we'll be looking at exporting [natural gas] very quickly." However, Mead also said stateside solutions should come first, including getting natural-gas vehicle fleets enabled on the roads. Mead said he is part of a 12-state coalition which will make a pitch to Detroit auto manufacturers to have natural-gas vehicles coming off the line.
While shipping natural gas from the United States to markets like Japan where
it would command a higher price could provide a solution, domestic solutions may be important because shipping natural gas is not as simple as shipping coal or oil.
In order to be economically viable, natural gas must be shipped as liquid natural gas (LNG) which takes up 600 times less volume than natural gas. But in order to become LNG, natural gas must first be purified by removing dust, water, helium and heavy hyrdrocarbons, then cooled to -260 F. With temperatures that cold, the gas becomes a liquid at atmosphere, but it has to remain that cold in transport.
The cryogenic tanks needed to ship LNG are expensive, as are the plants needed to purify and chill the natural gas into a liquid state. The U.S. Energy Information Administration estimates that the cost of constructing a liquefaction plant ranges from $1.5 to $10 billion dollars.
Nevertheless, nine different projects have applied to the Department of Energy for authorization to export a total of 14 billion cubic feet per day of domestically produced LNG. Five LNG export terminal sites have begun the application process with the Federal Energy Regulatory Commission (FERC) for approval to construct liquefaction facilities, totaling 9.5 Bcf/d of capacity. The very first of these, Sabine Pass, has FERC approval and is expected to begin operations by 2015.
A report released by the Energy Information Administration said that increased exports of LNG could raise natural gas prices in the United States by as much as 54 percent by 2018.
For more on the export potential of natural gas, watch for the May edition of the Wyoming Business Report
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