Three years ago, liquefied natural gas turned up in a conversation concerning how Anadarko Petroleum Corp. ended up exploring for oil in Algeria. Trunkline, a sibling of the Houston independent, which was part of Panhandle Eastern at the time, had a long-term contract with Sonatrach for high-priced LNG in 1986, when gas prices had crashed. Panhandle was looking for ways to get out of the deal, or it would pummel the company. Eventually it was worked out that the newly spun-off Anadarko Petroleum would invest $100 million in exploration in the Sahara Desert approximately 90 miles southeast of the famous Hassi Messaoud Field. The field is one of the world's best producers to date but wildcats outside the area had resulted in little success. Since 1986, more than 40 oil companies have followed in Anadarko's tracks. The company now nets 10 million barrels a year of light, sweet oil from the desert. Since that conversation, LNG has turned up in others, here and there. But recently it's in nearly every exchange involving gas demand. Robin West, chairman of energy-advisory firm The Petroleum Finance Co., says 14 new LNG terminals are presently proposed for the U.S. He predicts the industry will overinvest and there will be too much LNG coming in, but that saturation point will be a while. One of these is an offshore Louisiana facility planned by integrated energy company CMS Energy Corp. that would handle 1 billion cubic feet (Bcf) of gas per day initially by 2006. CMS already owns one of the two U.S. operating terminals-one in Lake Charles, Louisiana. The other is on the Atlantic coast in Everett, Massachusetts, and is owned by Tractabel. The U.K.'s BG Plc has already wrapped up all the Lake Charles plant's capacity (630 million cubic feet per day), through 2020, with LNG it will import from Egypt. CMS' other plans are for terminals onshore Mexico, near Tampico on the Gulf coast, supplying Mexico's growing demand, and the other on the Pacific Coast, supplying California and northwestern Mexico. Also handling 1 Bcf per day, each of these could be expanded to 2 Bcf per day by 2009, according to CMS president William T. McCormick Jr. McCormick believes importing LNG is economical at $3 to $4 per thousand cubic feet. Charif Souki, chairman of Houston-based Cheniere Energy Inc., agrees. He estimates LNG will cost $2.65 to $4.50 to find and produce, liquefy, ship, deliver and regasify. Cheniere, a Gulf of Mexico oil and gas producer, is getting into the LNG terminals business. Cash flow from oil and gas production is being diverted now to the new strategy. Prospect generation will continue, he says, but the company's full attention is turning to LNG. "The size of the [gas] reserves we find is getting smaller and smaller," he explains. Cheniere's plans are for three LNG facilities on the Texas coast. One property has already been leased, in Freeport. Each are estimated to cost $300 million to permit and build, and would handle 200 Bcf of gas per year initially in 2006. Michael J. Economides, a principal with Houston-based energy-advisory firm MJE Consultants and co-author of The Color of Oil, has endorsed Cheniere's plans. He is high on LNG. "Where is the gas going to come from?" he says. From LNG. Shell and BP hope a great deal will also come from the deep waters of the Gulf of Mexico. They have commenced surveying to lay a 100-mile, $150-million gas pipeline to transport up to 1 Bcf a day from their Na Kika project in 6,300 feet of water and from the nearby Crazy Horse Field. Two other U.S. LNG terminals exist and are gearing for reopening: El Paso's at Elba Island, offshore Georgia, and Williams' at Lusby, Maryland. Two more are planned for offshore Florida, one on the Gulf coast and one on the Atlantic coast, according to Souki of Cheniere. Another 14 LNG terminals, each handling 1 Bcf of gas per day, would put an additional 5 trillion cubic feet of gas into U.S. pipelines a year, beginning in 2006. With forecasts for annual U.S. gas demand to grow approximately 10 Tcf to about 32 in 2015, another 14 LNG terminals might not be an overinvestment, after all. An interesting fact: CMS' LNG business unit is Trunkline LNG Co., the old sibling of Anadarko. -Nissa Darbonne, Managing Editor

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