Infrastructure, Exports, and Emissions
New York Energy Week kicked off Monday, June 16, with the Natural Gas Markets Breakfast at CME Group. The event brought together broad market participants — from upstream producers to financiers and entrepreneurs — to address the revolutionary shift in fossil fuels economics over the past six years. Moderated by Peter Gardett, Founding Editor of Breaking Energy, the discussion panel included Joseph Bohm, President, Dual Fuel Corporation; Carolyn Kissane, Academic Director and Clinical Associate Professor, Energy and Environment Concentration Director, New York University; and Branko Terzic, Former CEO & Commissioner, Federal Energy Regulatory Commission.
The shale gas revolution has shifted the United States from one of the largest global energy importers to one of the top producers. Resource abundance, advancements in hydraulic fracturing technology, and public monetary incentive to allow drilling — through land and mineral rights — are key factors in the recent production boom, but infrastructure is lagging behind. This is especially evident in the Bakken region, where producers extract both oil and gas, but lack the infrastructure to capture the less-attractive gas, causing them to flare — or burn off — more than $1 billion worth every year, according to panelists. Further downstream, the harsh Northeast winter exposed infrastructure limitations, as spot natural gas prices spiked with high demand. Branko Terzic noted that the infrastructure limitations are not going unnoticed, as the Interstate Natural Gas Association estimates there will be $205 billion invested in natural gas infrastructure through 2035. These investments — and continued policy support, such as FERC Order 636 — will continue the expansion of “the most flexible and attractive pipeline regime in the world”.
The shale boom has completely changed the domestic natural gas supply and demand landscape. Fifteen years ago, there were more than 20 LNG import terminal applications, and today that number has reversed, with 25 LNG export terminal applications pending DOE review. To address the extensive and growing DOE approval list, on May 29 DOE proposed to change the LNG non-free trade export terminal approval process. The new, streamlined process would eliminate DOE conditional approvals, requiring applicants to first complete a FERC environmental compliance review, to bring forward more advanced projects and allow DOE to better assess project impacts. And, despite the 2012 approval of the Sabine Pass export terminal, panelists agree that the first exports are still 18 months away. And, despite vast domestic supplies, Branko Terzic emphasized the US will not capture the global LNG export trade, as other low-cost suppliers such as Qatar and Trinidad & Tobago.
Going forward, with proposed EPA emissions reduction goals in response to climate change, Dr. Kissane stated that natural gas “makes the most sense.” In addition to increased domestic natural gas consumption, panelists emphasized the opportunity to export crude oil — which has been banned since the 1970s — and Branko Terzic stated there is “really no argument not to export oil”. As the crude export ban gets re-examined in Washington, a higher oil price would incentivize production. With the rapid pace of domestic resource development, there are clear infrastructure limitations and policies to be addressed to move the oil and gas industry forward and achieve domestic energy independence. View the full event recording here.
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