China and LNG

Natural gas is a relatively clean and inexpensive fossil fuel which can be burned to produce a reasonable amount of energy. As of March 2008, California has some of the lowest natural gas prices in the world on the spot market. A lot of this is due to California’s ample supply of gas coming in from Canada and the Rocky Mountains.

Last semester Commissioner John Geesman of the California Energy Commission. Came and spoke in one of my classes. A large part of his talk focused on California’s increasing reliance on gas. As gas use expands California needs to secure reliable sources of gas to mitigate price risks; the old law of supply and demand suggests that the more supply we can secure, the lower our prices will be. One method of securing greater supply is by importing liquefied natural gas (LNG). LNG is cooled and compressed gas which is more suitable for shipping from distant countries (a liquid or solid state of a substance has approximately 1/1000th the volume of the gaseous state).

Commissioner Geesman pointed out the one major problem with LNG in California, a lack of sites for regassification facilities. Regassification facilities turn the natural gas from a liquid back into a gas. These facilities require land that simply isn’t available. Creating offshore facilities presents other problems including interference with shipping lanes and whale migration, prohibitive cost, besmirching of the coastline, and the pollution problem remains. Imported gas (other than that from Canada) also has other problems including a higher BTU content and a higher WOBE index than domestic supplies which our utilities and appliances are not calibrated for. The problem can be solved by commingling the imported gas with domestic gas, but it is a problem nonetheless.

Well, it looks like California can worry a bit less about LNG regassification facility siting because the Financial Times reported today that, China signs two big LNG deals with Qatar. The article observes that a lot of the gas was destined for the US, but no longer after these two new deals involving PetroChina, CNOOC, Royal Dutch Shell, and the Qatari government. China lacks its own natural gas resources and the article says that this kicks the competition up a notch for natural gas in East Asia between China, Japan, South Korea, and “other Asian nations.” As long as it helps China kick the coal habit I guess it’s a good thing. How much of that gas is around, anyways…