The Oil Drum

Good article, Heading Out

This once more demonstrates the extreme importance of a fundamental but "vaporous" (pun intended) element in the natural gas business:
TRUST

The United States continues to lag badly on the needed action regarding LNG, as local opposition, financial glitches and technical problems have all stood in the path of the badly needed development of this option.

It seems that the U.S. thinks that when it decides at the very last possible moment to jump into the LNG market, the gas will be there waiting for us. We now think that everything can be done JIT.

This may be a very great error. Many nations who are not as terrified of elements of central planning when it concerns strategic resources, are already looking for the contracts and making long term arrangements. Every relationship goes through the normal phases of storming, norming, and then performing, as the terms are worked out. Other nations are already storming and attempting the norming of the long term natural gas relationships that will be needed for modern national survival in the world. They hope to be performing while the U.S. and other slow nations waste time in analysis paralysis.

As we see, however, the power of "contract" and the trust between the contracting parties are central to the success of the projects and ventures, since billions of dollars are on the table, and times are long before one can hope for the needed Return On Investment.

Russia is entering a sellers market, literally surrounded by big money customers (Europe, China and India)

The OPEC and Persian Gulf nations seem to be putting the LNG option on the back burner, and instead spending money on petrochemical facilities to convert natural gas to finished products such as fertilizer, chemicals, and possibly GTL syn fuels, thus end running the whole need for the extremely expensive and time sensitive LNG industry. This will for the first time, make them truely modern international players in world commerce and industry. They will become more than raw materials only powers in the world.

Thus, the U.S. need for gas in raw form and not as a finished product is declining in importance to those whom we would hope to be our suppliers.

The list is short: Canada by pipeline of course, and our old stand by suppliers in Trinidad and Tobago. We have a long history of trust with Algeria as a supplier, but European competitive pressure will surely become a larger factor there, as the Europeans try to rescue themselves from complete dependence/obedience to Russia.

There is of course our staunch allies in Qatar, but they are one of the nations rapidly developing the finished products industries discussed above, and they are a long way from the U.S.. The timing and logistical issues are difficult.
The increased demand for natural gas throughout the Middle East will also have an effect.

The truth is, we are already late. We are not running out of time, we are out of it.

The United States must begin a "natural gas consumption restraint" program immediately, but of course, we will not. The natural gas industry has long promised there will be no problem, they know what they are doing and have the situation well in hand. They have been exceptional at gaining customers, promising that natural gas will be available for all things for all people and almost for all time. We are now boot strapping other energy production upon natural gas, including the tar sand projects, ethanol production, Ultra Low Sulfur Diesel fuel (ULSD), as well as the so called "hydrogen highway" and the fuel cell. Even Distributed Generation (DG) is becoming dangerously addicted to the easy clean natural gas now available (extreme caution is to be advised here).

There is only one thing I know of about energy in which you could hope for agreement between such disparate parties as Matthew Simmons, T. Boone Pickens, Colin Campbell and ASPO, former Fed Chairman Alan Greenspan, CERA's Danial Yergin, President G.W. Bush, Congressman Roscoe Bartlett, the National Petroleum Council (NPC) the National Chemical Council industry group, the Corn Growers Association, and the ethanol producers of the United States:

North America, and the United States in particular are facing a natural gas crisis of great magnitude and is refusing to make the sacrifices needed to address it.

Our allies and friends in the United Kingdom will get there first of course, followed by the Europeans unless they accept Russia's terms and all they imply. The United States lives in the fantasy that it is excepted, that somehow, we will find that giant gas field, build that giant pipeline just in time, and talk about when we were once afraid of a gas crisis.

It may happen. But we are taking a fantastic and unneeded gamble with the future of a great nation and with the livelihood of millions of people in placing our hopes in such a reckless way.

Thank you

Roger Conner Jr.
Remember, we are only one cubic mile from freedom.