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A new fuel fix: boon or bane?

The US increases natural-gas imports to meet energy demands. Will it create a new dependency?

By Staff writer of The Christian Science Monitor / June 23, 2005



FALL RIVER, MASS.

Climbing to the top of a dizzyingly curved stairway welded to the side of a huge cylindrical tank, Tom Gehrig thinks he can see America's energy future.

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It's a gargantuan tank - dwarfing the one he's standing on - which he would build here in Fall River, Mass., to hold 200,000 cubic meters of imported liquefied natural gas. LNG would help meet the United States' growing energy needs, but this project has sparked protests by residents of this working-class city, worried about terrorist attacks. "I'm a believer in free markets," says Mr. Gehrig, president of Weaver's Cove Energy, gazing across the site. "If people don't want LNG, the question I would ask them back is: 'What are you going to do?' "

What indeed?

For three decades, the US has coped - sometimes uncomfortably - with its growing reliance on foreign oil. But at least that dependence was limited to transportation, while domestic coal and gas continued to power the nation's factories and heat its homes. Now, the rising price of domestic natural gas has triggered a plan to dampen those price hikes by bringing in foreign LNG.

That may be smart economics, at least in the short term. But some analysts worry that in the long run, the US may be setting itself up to become dependent on a second foreign fuel, just as it has become increasingly dependent on foreign oil since the 1970s.

"All we're talking about doing is replacing one dependency with another," says Gal Luft, executive director of the Institute for the Analysis of Global Security in Washington, D.C., a think tank focused on energy security issues. "The main sources of natural gas are located in the Middle East and Russia. So we're talking about the same sort of problem."

Some of the parallels are uncanny. The US is largely self-sufficient in generating electricity. Nearly half comes from coal, 20 percent is nuclear, about 18 percent is powered by natural gas, and the rest comes from hydropower and other renewable sources. Excluding gas piped in from Canada and Mexico, natural-gas imports (in the form of LNG) made up about 3 percent of US demand last year.

That will almost certainly change. Imports of LNG - the liquid form of natural gas, supercooled to 260 degrees below zero so it can be transported by tankers - could rise to 21 percent of total US gas consumption by 2025, according to the Department of Energy. Some economists who have looked at the issue say it could easily rise to 25 to 30 percent by then. That's roughly the share of oil imported to the US when the first energy crisis hit in the 1970s.

"There are certainly people who are worried about the US trading one form of energy dependence for another," says Reid Detchon, executive director of the Energy Future Coalition. His group recently proposed a plan for added US energy security that includes LNG imports - but only warily. "If LNG became a principal source of energy for the US and demand rises around the world, we're going to have problems in the future similar to those that we have with oil today," he notes

There are some mitigating factors, however. For one, nations with the potential to export LNG may be more numerous and far more geographically diverse than the current oil-producing nations, some experts note.

Known global reserves are estimated at 5,500 trillion cubic feet. To tap that, more than 60 new LNG liquefaction facilities that can chill the gas to a liquid for transport are in planning or construction phases, according to Henry Lee, director of the Environmental and Natural Resources Program at Harvard University. Norway, Russia, Egypt, Iran, Venezuela, and Peru, among many others, hope to join Indonesia, Oman, Algeria, Nigeria, Libya, Australia, and the United Arab Emirates as exporters.

But building a liquefaction facility would require an upfront investment of $1 billion or more. Once they invested that amount, few nations would be likely to reduce production or cut off supplies, Dr. Lee concludes.

"Factors that contribute to vulnerabilities that industrialized nations have with oil are simply not present with LNG and natural gas," Lee says in an interview. His recent study of LNG markets notes security concerns, but concludes that fears of a future LNG cartel cutting off supplies "are overstated." Instead, there are "significant benefits, in terms of supply, by bringing in more LNG," he says.

Others think so, too. New supplies of LNG are "an economic imperative," declared a report last month by the New England Council, an alliance of business and government leaders. It calls for construction of new LNG import facilities "somewhere in New England within the next several years."

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