Why the U.S. Imports LNG Despite Its Gas-Export Boom
Why the U.S. Imports LNG Despite Its Gas-Export Boom: QuickTake
(Bloomberg) -- More than a decade in and the U.S. shale boom keeps breaking output records, with fields from Pennsylvania to Texas producing more natural gas than the country needs. That has triggered billions of dollars of investments to ship liquefied natural gas overseas. Yet the U.S. is still importing LNG from places such as Russia and Nigeria. There are two reasons for that: pipeline bottlenecks and the requirements of a 1920 law meant to support a robust U.S. shipping industry.
1. Does the U.S. consume more gas than it produces?
No. Gas production jumped 12 percent in 2018 to a record 89.6 billion cubic feet a day while consumption was 81.7 billion cubic feet per day, according to the U.S. Energy Information Administration. The problem is getting it to the right places at the right time because of insufficient pipeline capacity near big metropolitan centers. Pipelines historically have been designed to operate at a reduced rate for most of the year so that when a cold snap hits, there’s space for a surge in demand. But with the shale boom, many households, power plants and factories have switched from fuels such as heating oil and coal to take advantage of cheap gas. This added consumption means that some lines are close to full year-round and are thus unable to cope when demand peaks.
2. Where are shortages occurring?
Mostly in the Northeast. The region was the destination of most of the 200 million cubic feet a day of LNG the U.S. imported in the first 10 months of 2018. In January 2018, frigid weather sent New York City spot gas to a whopping $175 per million British thermal units, compared with less than $3 elsewhere in the country, as gas distributors engaged in bidding wars for pipeline space.
3. Why can’t the U.S. buy its own LNG?
There’s certainly lots of it. Surplus U.S. gas supply allowed America’s booming LNG industry to ship 2.8 billion cubic feet a day to overseas markets during the first 10 months of 2018, according to the EIA. But while the U.S. is poised to become the world’s third largest LNG supplier by 2020, with six export facilities, the Jones Act of 1920 mandates that vessels moving between U.S. ports be built and registered in the country, and crewed by Americans. There are currently no U.S.-flagged LNG carriers.
4. Where is imported LNG coming from?
Everett terminal in Massachusetts, by far the most active of the dozen import terminals in the U.S., received about two dozen cargoes in 2018, with all but one apparently coming from Trinidad and Tobago, according to Energy Department and ship-tracking data compiled by Bloomberg. Russian LNG made its debut in the U.S. in January of last year as prices climbed during freezing temperatures. Dominion Energy Inc.’s Cove Point terminal in Maryland imported a cargo from Nigeria in late December.
The Reference Shelf
To contact the reporter on this story: Naureen S. Malik in New York at nmalik28@bloomberg.net
To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Carlos Caminada, Lisa Beyer
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