- The Washington Times - Monday, December 29, 2003

In 2000, I raised with the Department of Energy the possibility of restoring Algeria’s position of the late 1970s as the leading supplier of baseload liquefied natural gas (LNG) to the United States. Four terminals had indeed been built at the time on the Eastern seaboard specifically to regasify the Algerian fuel.

Then the U.S. comparator natural gas prices ceased to be cost-based, as deregulation opened the way to competition from Canadian piped gas. The floor dropped out of the LNG market. The terminals had to be mothballed and U.S. LNG importing firms filed for bankruptcy.

But by 2000, hemispheric sources of piped natural gas were leveling off, while consumption was soaring (U.S. LNG imports later doubled between 2002 and 2003). However, I was told at the time that, apart from the kind of gas peak-shaving supplies of which Algeria had been the main provider, hemispheric self-sufficiency would continue to prevail. The 1999 report of the Natural Petroleum Council had said so.

Washington is now abuzz with experts predicting that the United States could be importing annually within two decades as much LNG as the combined imports of the whole world today.

Shortsightedness in anticipating U.S. LNG needs is reminiscent of that concerning world oil projections in the 1970s. Hopefully, the current enthusiastic response, belated as it is, will not lead to another gas bubble that would undermine, when it bursts, the foundation of the nascent international partnership. And this foundation is trust.

Building trust is what brought together 14 cabinet ministers and 23 delegations and major corporations from across the world at the Washington LNG Summit hosted by Secretary of Energy Spencer Abraham on Dec. 17-18.

The summit noted that there is plenty of LNG on the world market, close by in the Atlantic Basin region (including Algeria) and farther afield, offering a new opportunity to develop innovative international partnerships on the wings of our growing interdependence.

The price of natural gas is now about $7 per million BTU, in energy terms the equivalent of a barrel of oil at $42. For oil this would have caused an outcry against OPEC. But there is no OPEC to blame in this case.

Admittedly, market inefficiencies are the culprits and they do not make news. They are caused by long delays for federal regulatory approval, as in the case of new terminals. They result also from the limited availability of spot loads of LNG, as these are less than 10 percent of overall trade. Unlike oil, LNG trade is still governed by long-term contracts: Because of the huge upfront investments required, few resource providers are prepared to commit tens of billions of dollar unless they anticipate a fair chance of recovering their costs. Both the industry and Energy Minister Chakib Khelil of Algeria made this point at the summit.

Local communities may also act to restrain market forces. This may occur in exporting countries, as in Bolivia, where the government was ousted over an LNG export deal. It can also occur in importing countries like the United States, where people feel apprehensive about unfamiliar safety and security risks.

The summit recognized that we can address these market inefficiencies cooperatively. The federal regulatory approval period for new terminals may be shortened from three years to one year. LNG markets can be made less rigid through partnerships between resource holders and the U.S. gas industry, spanning the value chain from production to liquefaction, transport, regasification and distribution. The emergence of a real-world market for LNG can help.

As for the safety concerns of local communities, there needs to be more awareness promotion on all sides: Japan is entirely dependent on LNG for its gas consumption. It has operated 23 terminals on its limited land mass for several decades without any accident. Mr. Abraham also mentioned that there have been 33,000 LNG carrier voyages covering 60 million miles over a 40-year period without a major accident.Security risks should not give rise to scare-mongering: If a terrorist missile hit a methane tanker bound for Cove Point, Md., in the Chesapeake Bay, the gas would implode rather than explode. It would not effect surrounding communities. Nor would the LNG tanker’s draw allow its diversion by a terrorist to a shallow canal leading to the nuclear power plant in the bay.

Time remains of the essence. Since mid-2000, 11 ammonia plants have been shut down, causing job losses in the United States. Fertilizer prices have doubled, affecting the viability of U.S. family farms.Meanwhile, a methane tanker smoothly delivered its first load of Algerian LNG to Cove Point on Dec. 6. More than gas, it delivered the reminder that international LNG partnerships can be a win-win situation for all.

Idriss Jazairy is the ambassador of Algeria to the United States.


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