The string of scrapped proposals started in May, when Bradwood Landing in Oregon fizzled out with the bankruptcy of owners NorthernStar Natural Gas. Next came the Atlantic Sea Island Group, whose developers told the US Coast Guard in June they were suspending plans to build a terminal offshore New York and New Jersey.
In July, the main investor behind Calais LNG in Maine jumped ship,leaving its project manager scrambling to find a new financial backer. And in August, the fully permitted Maple LNG proposal in Nova Scotia admitted defeat to market forces.
Of the dozen other proposals already approved by US Federal Energy Regulatory Commission and another three applications awaiting consideration,how many new terminals will get built? The answer, according to David Ledesma an analyst with UK-based South-Court, is none.
"The logic says that there won't be any more," he said. "There is no need for more capacity. It's a very simple number to do."
The rush to build LNG terminals -- which preceded the large-scale development of shale gas in the US -- created import capacity of just over 14 Bcf/d -- about seven times the amount of LNG that tankers actually carried to the US in the past two years, said Biliana Pehlivanova, a commodities analyst who specializes in LNG for Barclays Capital.
"From a [US] market perspective we are quite well supplied, really for the foreseeable future," she said. "Between the potential for growth of shale gas in the US and also potential for growth of Canadian shale gas, the prospect for the US needing to import significant amounts of LNG to the order of magnitude that we already have capacity for are quite far out into the future."
Pehlivanova said the US might need to increase LNG imports a bit in the next four or five years. "But we're still well away from utilizing all of the existing capacity," she said.
Laurent Key, an analyst with Soci?t? G?n?rale, agreed that US LNG imports are unlikely to pick up anytime soon. "Given the base of production we have in the US, if producers don't cut back on their output, I don't see how we would need LNG imports not just for 2010, but even for 2011 and 2012," he said.
But project managers have a different outlook. Their proposals make sense for very specific regional or supply reasons, they said, despite the unfavorable broader market trend.
Bill Cooper, president of the Center for LNG trade group in Washington, pointed to the National Petroleum Council's 2003 Natural Gas Study to characterize failed LNG proposals as natural occurrence as the market decides what it can support. The study, which was released before shale jolted the gas industry, predicted the country would need seven to nine LNG terminals to meet
demand by 2015, just below the 10 now operating.
"It's amazing how accurate that really was," he said. "They kind of got it wrong on the demand side, because they couldn't factor in shale gas, but on the other hand they got the number of terminals. We're tracking it."
But Cooper acknowledged that the market for new LNG terminals is tough."We're way under-utilized," he said. Still, Cooper said he expects that some of the projects still on the drawing board will be built. "It just depends on each individual business model," he said.
Even if the market has turned the proposals into long-shots, they're very much alive at the local level, where environmental assessments and the state permitting processes are continuing. The supply and demand equation hasn't kept Oregon state agencies, for instance, from having to defend themselves against the recent lawsuit by the Pacific Connector Pipeline, which accused the state of unreasonable permitting delays on the system designed to carry gas from the proposed Jordan Cove LNG terminal.
"I've been reading all the market analysis that comes my way," said Mike Carrier, a top energy adviser to Governor Ted Kulongoski. "As long as our economy is as soft as it is, as long as the demand for natural gas is low and the price stays as low as it is and as long as the domestic supply of shale
gas appears to be as robust as it is, I agree with what the governor said recently, that it's difficult to see a business case for an LNG import facility."
Ledesma, who didn't speak to specific proposals, said there might be one that beats the logic.
"The only reason I could see more capacity built is if there was a very, very specific requirement, whether it was to meet a specific demand point or if there was a demand point that wasn't serviced by a pipeline," he said.
Key said it would take a lot to turn the dynamics around.
"You must bank on increased natural gas use for vehicles, a faster conversion of coal fired plants to natural gas-fired plants, a sustained economic recovery -- which even for the next few years is not really forecast-able," Key said. "It looks like everything is converging to go against the idea of building new LNG plants."
