Thought Piece

This is a thoughtful, informed piece about LNG growth internationally. As usual, writing with clarity and research depth, Tom Shepstone has reported on NG, LNG, economics, economic development and legal issues related to the Marcellus and beyond. Tom looks at LNG development in places like Croatian and already announced agreements with Japan, China, and India, but the most exciting insight about his piece is the rapid deployment of natural gas in Pakistan which is a country of considered size. More importantly, Pakistan is undergoing a very personal natural gas revolution: As Tom puts, “it is the ordinary person who are benefiting by our natural gas development, both here and there….Fracking has been a wonderful innovation that’s lowered the cost of energy dramatically and spreads its benefits around the world. There will always be opponents but progress is inevitable.” I certainly could not have said it better.

LNG Projects Happening Across World Equal Opportunity Here at Home

DRBC fracking ban - Tom Shepstone ReportsTom Shepstone
Shepstone Management Company, Inc.


New LNG projects are taking place across the world, which means opportunity is knocking for U.S. gas produced in places such as Susquehanna County.

Reading the weekend’s natural gas news, one thing stuck out to me; how many LNG projects are underway to help other nations diversify their gas supplies. That, of course, means one thing for U.S. producers—growing opportunities. Moreover, these aren’t just opportunities for natural gas companies here at home.

They also represent assurance for landowners in places such as Susquehanna County, Pennsylvania and others in Pennsylvania, Ohio, Texas and West Virginia, et al that the natural gas is there to stay and will continuing enriching local economies for decades to come. There will be more hospitals built, more college trained welders and natural gas technicians, more communities served with gas, more businesses and more new barns.

LNG projects are, seemingly, happening everywhere, although not without opposition from the usual suspects. Consider the following example from The European Scientist (emphasis added):

Croatia has approved the construction of a new liquefied natural gas (LNG) terminal on the island of Krk in the northern Adriatic Sea. The law, passed on Thursday by Croatia’s legislature, is part of a wider European Union effort to diversify its gas supply and reduce dependence on Russian imports.

In addition to diversifying Croatian gas mix, the project will also supply gas to other countries in central and southeastern Europe that currently depend on gas imported from Russia. Croatia currently imports 60% of its gas supply from Russia, but this number is even higher in other countries in the region. According to EU statistics database Eurostat, many central and eastern European nations depended on Russia for over 75% their gas consumption in 2016

Local authorities, activists and environmental groups have raised concerns that the terminal could affect tourism, which accounts for as much as 20% of Croatia’s GDP.

“We will ask the constitutional court to assess whether this law is lawful,” Marija Mileta from Green Action told Xinhua on Thursday. Mileta said that an environmental impact study provided by LNG Hrvatska was not conducted properly…

Environment and energy minister Tomislav Ćorić emphasised the project’s strategic importance, saying the terminal would improve the security of Croatia’s gas supply and provide consumers with lower gas prices.

Croatia’s department of transport and infrastructure stressed that experts have reviewed plans for the project and determined there were no major risks to the environment.

The terminal, which has a planned capacity of 2.6 billion cubic metres of gas a year, is expected to be operational by early 2020.

The article reveals how difficult it is to do anything, anywhere at all, these days, give phony environmental concerns. Much more important, though, is that it demonstrates how reality is setting in.

That reality is that it makes no sense to feed the Russian bear to get energy in return when there are alternatives such as shipping in the energy from the U.S. via LNG. Croatians, only relatively recently free of communism, are able to appreciate this in ways other European nations captive to political correctness simply can’t.

Croatia values its freedom and is determined to protect it. Hence, they’re building LNG import facilities that will help protect it; which is good for U.S. gas producers. It also means economic freedom for rural landowners here at home.

Croatia is far from the only example. There are also new LNG projects (which, in these cases, involve using LNG to produce electricity) just announced for China, India and Japan:

China, Japan and India have secured three mega power projects to be completed within the next two years to meet urgent electricity requirements, a senior official said.

Power and Renewable Energy, Ministry Secretary, Suren Batagoda told the Sunday Timesthese three Liquefied Natural Gas (LNG) plants would generate a total of about 1,000 Megawatts (MW) to supplement the current daily output of about 2,500 MW.

That LNG can come from many places, of course, and Mozambique will be one of our competitors, but, with U.S. companies getting ever more efficient, we’re in the game. Moreover, it’s Anadarko that’s developing Mozambique’s off-shore gas, which means, I suspect, their contracts to sell it can always be satisfied in part with our gas.

And, then there’s Pakistan:

Pakistan has imported a record 10 million tonnes of liquefied natural gas (LNG) in the last three years, helping the country save approximately $3 billion in fuel imports.

The import of LNG, which is a cheaper source of energy than furnace and diesel oil, enabled the country to reduce total gas deficit of over 2.5bn cubic feet by 25 per cent, according to an official source familiar with the operations…

The start of commercial operations of three new gas-fired power plants — Haveli Bahadur Shah, Bhikki and Balloki — with a total capacity of 3,600MW in Punjab will further increase the demand for LNG in future.

“Though a second terminal has also become operational at Port Qasim, Pakistan needs three to four more such facilities to address the ongoing energy shortage,” he believed.

The country imported LNG through the first private-sector LNG terminal — Engro Elengy located at Port Qasim. The terminal handled 160 LNG cargo ships in three years and currently regasifies approximately 600-630 mmcfd of gas and pumps it into the gas distribution network.

“The gas shortage had made the government unable to provide gas to different sectors of economy including power plants, CNG stations and fertiliser plants, resulting in huge production as well as foreign exchange losses, but the import of LNG has changed the scenario,” says the official.

The government was paying capacity charge (idle charges) to power plants which increased the price of electricity for the consumers. Saif Power, Halmore, Sapphire and Orient power plants were operating at less than 50pc service factor on diesel which is an expensive fuel compared to LNG. Non-availability of gas to fertiliser plants was also resulting in outflow of valuable foreign exchange as a result of imports to meet demand.

Due to LNG import, more than 200 CNG stations across Punjab have been getting gas at better frequency which has facilitated the transport industry as well as the public at large. The LNG as a fuel for power generation is more efficient over furnace oil (60pc more efficient on RLNG vs 40pc on alternate fuel), has much lower operation and maintenance costs and is thus friendlier on the economy in the form of lower electricity tariff for the masses

That last part is also revealing; it is ordinary people who are benefiting by our natural gas development, both here and there. LNG projects are spreading the wealth of fracking around the world. They open the door of opportunity everywhere and, for that reason, there’s no stopping it. That’s the ultimate message from the natural gas news this weekend; fracking has been a wonderful innovation that’s lowered the cost of energy dramatically and spread its benefits around the world. There will always be opponents but progress is inevitable.