9/29/14, "A U-Turn for a Terminal Built in Texas to Import Natural Gas," NY Times, Clifford Krauss, Sabine Pass, Texas
"The giant Golden Pass natural gas import terminal here,
meant to bring Middle Eastern gas to energy-hungry Americans, sits
eerily quiet these days, a sleepy museum to a bygone era. Its
5,000 valves, 50 million pounds of steel and ship berth as big as 77
football fields — representing a $2 billion investment by Qatar
Petroleum, Exxon Mobil and Conoco Phillips — have been dormant for
nearly three years. The unexpected American shale fracking frenzy
produced such a glut of domestic gas that
.
But the Golden Pass story is only beginning.
Qatar
Petroleum, the state oil company, is now requesting permission to
export American gas, proposing with its partner Exxon Mobil an audacious
conversion of the facility to export from import. The additional
estimated cost: $10 billion, if not more. Conoco
Phillips has bowed out of the export project, deciding not to double
down. For Qatar Petroleum and Exxon Mobil, the retooled plan represents a
grand improvisation and a plan to export a sizable share of the new
American bonanza.
“Do
we hope to make money out of it that we are not making today?
Absolutely,” said Robert S. Franklin, president of the Exxon Mobil Gas
and Power Marketing Company. “There is very significant upside in this
project.”
The
two companies propose to reverse some pipelines, using the existing gas
storage tanks and docks and adding three enormous refrigerant plants to
the complex on land now occupied by cattle grazing under a blazing sun.
The plants will take American gas and cool it to minus 260 Fahrenheit,
condensing it to a liquid that can be loaded on tankers and shipped to
Asian, Latin American and European markets.
.
.
Golden
Pass is one of eight potential liquefied natural gas projects Exxon is
considering, including projects in Canada, Australia and Tanzania. As
the biggest gas producer in the United States, Exxon could profit
handsomely from the terminal, which could export two billion cubic feet
of gas a day, nearly 3 percent of current production in the United
States.
The
proposed conversion offers many bonuses for Qatar, which plans to put
up 70 percent of the money for the export project. It is a way to
salvage a failed project from an embarrassment and convert it to a jewel
among its gas investments, which already stretch from the Persian Gulf
to the Adriatic Sea to South Wales. The project could enable the Persian
Gulf emirate to capitalize on the United States energy revolution in
time
Most
important, Golden Pass could help Qatar remain a dominant player in the
growing and fast-changing global natural gas market. Qatar leverages
its immense gas wealth to exert political influence in the Middle East
and North Africa, backing directly and indirectly Hamas in Gaza, Islamic
militias in Syria and Libya, and allies of the Muslim Brotherhood
across the region, even while granting the United States space for a
military base on Iran’s doorstep.
“The
Qataris have a clear view that their resource is both commercial and
geopolitical,” said Amy Myers Jaffe, an energy and Middle East
specialist at the University of California, Davis. “They want to sell
their gas to important places, and they want to be important to the
United States.”
Qatar
is a slowly declining energy power, in part because the United States
no longer needs its gas. In a few years, other countries, particularly
Australia, will replace Qatar as the global swing producer that will
determine where supplies go and at what price; the sale fees of gas are
set regionally and not globally as they are with oil.
But
large Asian and European buyers are increasingly bargaining to buy gas
at prices that approach the low American gas price, frequently on the
spot market. That is far below Qatar’s preferred price, which is indexed
to higher global oil prices. As more American gas comes on the world
market, Qatar could become increasingly squeezed, energy specialists
say.
Qatar
still has abundant pricing power. Its own export plants, which it runs
in partnership with Exxon Mobil, Royal Dutch Shell, Total of France and
other international oil companies, produce a third of the 230 million
tons of annual global liquefied natural gas output.
But
the export terminals being built around the world will provide markets
with an additional 80 million tons of annual capacity — and none of it
is being built in Qatar. Australia will replace Qatar as the largest
global gas exporter by 2017,
according to a report this year by Eurasia
Group, the New York-based geopolitical consultancy, and combined United
States and Canadian capacity could also surpass Qatar’s by 2020.
“If
they want to retain market share, Qatar is definitely going to need
more gas,” said Leslie Palti-Guzman, senior analyst for global energy
and natural resources at Eurasia Group.
Qatar
may need more gas, but producing more at home is a politically charged
proposition. The country has a moratorium on gas production from its
main offshore field, which it shares with Iran. A main reason, regional
energy specialists say, is to avert angry charges and potential
retaliation from Tehran for draining the shared field.
The
Golden Pass terminal would give the Qataris more gas to sell without
breaking their drilling moratorium at home. The Texas facility would
also give them an opportunity to sell American gas at the low American
price to mostly Asian traders who have the purchasing leverage to demand
it. In doing so, Qatar can try to preserve the higher oil-indexed price
for the gas it produces at home.
“For
Qatar to adapt, they not only need to adapt their marketing strategy in
terms of where to sell the gas but also in terms of their pricing
strategy to retain market share,” Ms. Palti-Guzman said. “Golden Pass
fits into that.”
Requests
to speak with Qatari government and oil industry officials went
unanswered. Exxon Mobil’s Mr. Franklin said he could not speak for them,
but offered praise. “They have been as good as anyone we’ve dealt with
from a business-friendly perspective,” he said of Exxon Mobil’s Qatari
partners.
The
Golden Pass project remains at least five years from fruition, and
Exxon Mobil executives have expressed frustration at the slow pace of
Obama administration approvals of proposed export terminals.
“Why don’t we have a permit?” Mr. Franklin complained. “I have no idea.”
The
terminal’s prospects appeared to many specialists to have improved when
the Energy Department issued a rule in May pushing platforms with
strong financial backing, which includes Golden Pass, to the head of the
regulatory line of approval.
More
than 20 projects are under consideration by the Energy Department and
the Federal Energy Regulatory Commission, which reviews their
environmental impact. The Energy Department gave final approval to two
proposed export projects this month, enabling them to ship gas to
countries without free-trade agreements with the United States. They
join Cheniere Energy’s terminal a few miles from Golden Pass across the
Louisiana border, which was the first terminal to gain full federal
regulatory approval and is expected to begin exporting by late 2015.
Still,
the Golden Pass project remains a somnolent hub of high technology and
giant structures perched incongruously in alligator-infested swampland.
The terminal bears few signs of Qatar, aside from a set of clocks
displaying both Qatari and Texas time down the hall from pictures of
Qatari tankers that had docked here years ago before the terminal went
quiet."
.
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