Friday, October 22, 2004

Future for a Natural Gas OPEC

Reuters reports that a Rice University Professor is studying the possibility of an OPEC-like cartel for LNG:

With gas fields in the United States aging and expected to see their yields fall off in the coming years, LNG is seen as a vital supplement for U.S. energy needs. In its vaporous form, gas can only be transported through pipelines, which prevents imports from overseas.

But through the LNG process, gas is super-cooled into liquid form, loaded onto a tanker, and shipped from virtually anywhere in the world. The LNG is then regasifed at port and moved out through a pipeline.

Peter Hartley, energy economist at Rice University's Baker Institute for Public Policy in Houston, believes Russia's overwhelming resources could negate any "gas OPEC."

"They can be a monopolist by themselves," Hartley said. "They're going to be exporting everywhere, to Europe and to Asia, and elsewhere when they get into the LNG business."

Sempra recently signed agreements to purchase LNG from OPEC-member Indonesia for its proposed receiving terminal in Baja California. Regulators should be wary of relying on any natural gas supplies from such a cartel.