Natural Gas prices may stay high for awhile....

[6SpeedTA95]

Bloomberg.com: U.S.

Chevron, Shell Delay LNG Projects, Sending Gas Higher (Update2)

By Angela Macdonald-Smith

Jan. 16 (Bloomberg) -- Chevron Corp. and Royal Dutch Shell Plc are delaying construction projects from Australia to Nigeria, threatening to drive natural gas prices higher for years to come.

None of the world's biggest energy companies approved developments last year to increase production of liquefied natural gas, which helps heat homes and run power plants from Tokyo to Boston. The main reason is the cost to build LNG plants has tripled in six years, according to Bechtel Group Inc., the biggest U.S. contractor.

Natural gas prices are three times higher than during the 1990s and consumption of the fuel will outpace the 1.6 percent annual gain in energy demand for the next 25 years, according to the International Energy Agency. Gas is also becoming more popular because it emits 29 percent less carbon dioxide than oil and 45 percent less than coal burned in power stations.

``Costs are going up and they're going up far faster than anybody expected,'' said Andy Flower, a U.K.-based consultant to the LNG industry and a former BP Plc executive. He forecasts that the world LNG shortage will last until at least 2011.

Natural gas in New York soared from an average $2 per million British thermal units in the 1990s because consumption increased, oil costs rose and domestic supplies diminished. U.S. gas production peaked in 1973, and demand since then has held steady, increasing the need for imports.

Natural gas for February delivery rose 6.7 percent to $6.601 per million British thermal units on the New York Mercantile Exchange last week. On Dec. 13, 2005, the futures rose to a record $15.78.

Replacing Oil

Gas may become more important than oil in the next 50 years because crude supplies are running out faster, according to the Paris-based IEA. Global oil and natural gas reserves were about the same at the end of 2005, equal to 1.2 trillion barrels of crude, according to data compiled by BP. Oil reserves are being burned almost twice as quickly as gas.

LNG sales rose about 11 percent last year to 157 million metric tons, according to Wood Mackenzie Consultants Inc. in Edinburgh. It may jump about 66 percent to 261 million tons in 2010 and another 87 percent to 488 million by 2020, the group said.

Record LNG prices won't fall for ``years to come,'' said Ari Soemarno, president of Indonesia's state energy company, PT Pertamina, until 2005 the world's largest LNG exporter.

Prices under multiyear contracts, excluding freight and insurance, range as high as about $10 per million British thermal units in Asia, assuming $60 a barrel for oil, an element in formulas that determine LNG prices. LNG will say high, even if oil declines, because of shortages, Soemarno said.

Getting Gas

Natural gas deposited near industrialized nations is typically transported through pipelines. The challenge is getting gas from the biggest producers -- Russia, Qatar and Iran -- to consumers worldwide who aren't linked by those networks. Now, gas that can't be transported is pumped back underground to force more crude to the surface, or burned off.

Some $37 billion goes up in smoke each year as waste, from Brazil to the Russian arctic to Nigeria.

Transporting gas on a ship requires it to be chilled to liquid at -162 Celsius (-260 Fahrenheit). The cost of building liquefaction plants has risen to as much as $600 million for each million metric tons of annual production from about $200 million in 2000, according to San Francisco-based Bechtel.

Greenspan's Appeal

Former Federal Reserve Chairman Alan Greenspan in June testified in Congress that LNG is ``very important for the U.S., for our national security'' and has argued for increased investment. ``We have not picked up as quickly as we need'' to increase imports, he told the Senate Foreign Relations Committee in Washington about energy security and economic risk. He declined to comment for this story.

Two of the newest and biggest LNG projects have been over budget and late. Shell's Sakhalin-2 LNG in Russia has doubled in cost to more than $20 billion. Stavenger, Norway-based Statoil ASA's Snohvit LNG plant will cost $9.5 billion, almost 50 percent more than first anticipated in 2002.

Building LNG plants now takes four years, rather than three, because contractors are stretched, said Flower, the consultant.

``Construction and permitting of LNG plants is a lengthy process,'' BP spokesman David Nicholas said from London.

Abandoned Timetable

Chevron, the U.S.'s second-biggest oil company, last year abandoned its timetable for approving the Gorgon LNG project in Australia. Developing the fields, which hold $400 billion of natural gas, would cost $10 billion and increase world supplies by 7 percent. The driller and partners Shell and Irving, Texas- based Exxon Mobil Corp. are studying ways to reduce construction costs.

The project is ``large, complex and faces considerable cost challenges,'' Colin Beckett, Gorgon area manager for San Ramon, California-based Chevron said in an interview last month.

Politics and violence also hold back LNG developments. In the seas between Australia and East Timor, development of the $3.7 billion Sunrise LNG project has been stalled for more than two years as the nations resolve how to split royalties.

Shell, the world's largest non-government producer of LNG, is struggling with projects in Nigeria because of rebel attacks and in Iran, where threats of sanctions over the nation's nuclear research program restrain investment. Iran has the world's second-largest gas reserves.

``Shell has a lot of LNG projects in the pipeline,'' spokesman Wim van de Wiel said by phone from The Hague. He declined to specify why they were being held up.

Hollywood's Take

American politics also get in the way. BHP Billiton, based in Melbourne, missed a target to win government approval in California for an $800 million import terminal near Malibu last year.

Celebrities including James Bond film actors Pierce Brosnan and Halle Berry, Oscar winner Tom Hanks, rock musician Sting and supermodel Cindy Crawford campaigned against the plant over safety concerns.

The ``not in my backyard'' syndrome is among the obstacles in the U.S., Greenspan said in June. ``It's going to take a while'' to increase supplies, he said.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net .

Last Updated: January 16, 2007 05:33 EST

This is pretty interesting, and for people wanting the government to eliminate tax cuts to the "big evil" energy companies all you're doing is making it less attractive for them to invest in LNG plants, refineries etc.

Government should IMO be involved in this and give these companies tax breaks for investing in LNG facilities in the US, this article does a good job making the reasons obvious.

The long term benefits to having a higher capacity for LNG are large and the benefits to domestic drilling are just as big with minimal downsides with new technology. This is a necessary part of our energy infrastructure and giving tax breaks for investment in our future energy infrastructure seems more than worth while to me.

[Pro Street]

Originally Posted by 6SpeedTA95

Bloomberg.com: U.S.




This is pretty interesting, and for people wanting the government to eliminate tax cuts to the "big evil" energy companies all you're doing is making it less attractive for them to invest in LNG plants, refineries etc.

Government should IMO be involved in this and give these companies tax breaks for investing in LNG facilities in the US, this article does a good job making the reasons obvious.

The long term benefits to having a higher capacity for LNG are large and the benefits to domestic drilling are just as big with minimal downsides with new technology. This is a necessary part of our energy infrastructure and giving tax breaks for investment in our future energy infrastructure seems more than worth while to me.

I'm sorry, but I don't see how the have any problem investing in thier own future business plans.. as most conservatives would say, why should the government get involved in businesses.

Oil companies know that LNG is a viable product after oil becomes somewhat obsolete. But You act as though any LNG project is possible with tax cuts.

From my perspective it seems like you're saying "give them tax cuts and maybe they'll do comething nice"

ransom just doesn't work for me.

[6SpeedTA95]

Originally Posted by Pro Street

I'm sorry, but I don't see how the have any problem investing in thier own future business plans.. as most conservatives would say, why should the government get involved in businesses.

Oil companies know that LNG is a viable product after oil becomes somewhat obsolete. But You act as though any LNG project is possible with tax cuts.

From my perspective it seems like you're saying "give them tax cuts and maybe they'll do comething nice"

ransom just doesn't work for me.

It's currently cost prohibitive in a big way for them to invest on their own in LNG facilities, the article spells it out. The only reason the government would get involved with business is because its OUR energy infrastructure. These companies are paying 40% of their profits in federal taxes and that doesn't include the host of local and state taxes that take a bite out of their profits. Giving them some incentive to do whats necessary for the long term benefit of the country before gas prices get to 15 dollars a thousand which would make our bills extremely expensive on a monthly basis seems to make perfect sense.

It is not a smart use of capital and assets for the businesses to do that, stakeholders and shareholders would suffer as a result. But with a 50% reimbursement through tax reductions it would once again be beneficial for the company, its shareholders and consumers to have the LNG facilities built. If we dont prices will slowly go up until its profitible for them to do this, all the while the media bitches, moans and creates anti energy company sentiment and tries to stir up "windfall profit taxes" when the entire situation is totally avoidable if government would quit taxing the crap out of these companies and offer an incentive for them to build the infrastructure.

Seems pretty simple to me.

edit: give them tax cuts speficially for investment in LNG facilities which is exactly what I said in my first post, I did not say give them tax breaks and hope they do something good..

[Pro Street]

Originally Posted by 6SpeedTA95

It's currently cost prohibitive in a big way for them to invest on their own in LNG facilities, the article spells it out. The only reason the government would get involved with business is because its OUR energy infrastructure. These companies are paying 40% of their profits in federal taxes and that doesn't include the host of local and state taxes that take a bite out of their profits. Giving them some incentive to do whats necessary for the long term benefit of the country before gas prices get to 15 dollars a thousand which would make our bills extremely expensive on a monthly basis seems to make perfect sense.

It is not a smart use of capital and assets for the businesses to do that, stakeholders and shareholders would suffer as a result. But with a 50% reimbursement through tax reductions it would once again be beneficial for the company, its shareholders and consumers to have the LNG facilities built. If we dont prices will slowly go up until its profitible for them to do this, all the while the media bitches, moans and creates anti energy company sentiment and tries to stir up "windfall profit taxes" when the entire situation is totally avoidable if government would quit taxing the crap out of these companies and offer an incentive for them to build the infrastructure.

Seems pretty simple to me.

edit: give them tax cuts speficially for investment in LNG facilities which is exactly what I said in my first post, I did not say give them tax breaks and hope they do something good..

How about this.. offer tax breaks ON any LNG facilities or products. Have oil companies open more LNG, H, or Bio pumps outside of locality owned service stations.

If we just give oil companies a blank check in terms of tax cuts, it will never be applied.


In fact, if I recall any alternative energy project gets a significant tax break as it is. But right now I'm not buying the excuse "waahh we make billions in profit but can't afford to build LNG facilities!"

I'm not buying it at all, and see no need to reward oil companies for saying they are looking into it. Show results first.

[6SpeedTA95]

Originally Posted by Pro Street

How about this.. offer tax breaks ON any LNG facilities or products. Have oil companies open more LNG, H, or Bio pumps outside of locality owned service stations.

If we just give oil companies a blank check in terms of tax cuts, it will never be applied.


In fact, if I recall any alternative energy project gets a significant tax break as it is. But right now I'm not buying the excuse "waahh we make billions in profit but can't afford to build LNG facilities!"

I'm not buying it at all, and see no need to reward oil companies for saying they are looking into it. Show results first.

Thats what I've said...Offer them tax breaks for dollars spent on LNG facilities...let me see if I can make it clear...


Lets say it cost 10 billion to build an LNG facility...its not a good use of company capital for this particular facility to be built with present prices. So the government says ok if you spend money building this facility we'll give you 50 cents on the dollar back via a tax incentive. Basically hte same thing you're saying if I'm understanding you correctly.


edit: one more thing its not about "afford" its about smart use of capital and assets accumulated by the company, you can't just spend money on fruitless projects...if the return on dollars isn't there, since the government is already heavily interfering with the energy markets how about creating some incentive.

[Pro Street]

Originally Posted by 6SpeedTA95

Thats what I've said...Offer them tax breaks for dollars spent on LNG facilities...let me see if I can make it clear...


Lets say it cost 10 billion to build an LNG facility...its not a good use of company capital for this particular facility to be built with present prices. So the government says ok if you spend money building this facility we'll give you 50 cents on the dollar back via a tax incentive. Basically hte same thing you're saying if I'm understanding you correctly.


edit: one more thing its not about "afford" its about smart use of capital and assets accumulated by the company, you can't just spend money on fruitless projects...if the return on dollars isn't there, since the government is already heavily interfering with the energy markets how about creating some incentive.

Your original quote makes it seem as though you were pushing for cuts SO they may build LNG facilities.

And these tax incentive programs already exist. There is no need for anymore, this is the oil companies just bitching and moaning

This is pretty interesting, and for people wanting the government to eliminate tax cuts to the "big evil" energy companies all you're doing is making it less attractive for them to invest in LNG plants, refineries etc.

in fact the DOE currently offers frants for LNG facilities

GTI Partners on Major DOE Program to Address Domestic Energy Needs

Alternative Fuels Data Center: Natural Gas

[6SpeedTA95]

Originally Posted by 6SpeedTA95

Government should IMO be involved in this and give these companies tax breaks for investing in LNG facilities in the US, this article does a good job making the reasons obvious.

that seems to say the same thign you and I have both been saying?

[6SpeedTA95]

Originally Posted by Pro Street

Your original quote makes it seem as though you were pushing for cuts SO they may build LNG facilities.

And these tax incentive programs already exist. There is no need for anymore, this is the oil companies just bitching and moaning




in fact the DOE currently offers frants for LNG facilities

GTI Partners on Major DOE Program to Address Domestic Energy Needs

Alternative Fuels Data Center: Natural Gas

There's obviously need for more or the companies would be investing in it on their own. I'm ok with the government butting out of the markets but that means not taxing these companies as taxes are one of the biggest forms of market control. The leverege the government has through tax incentives and subsidies is huge and they're not doing much about this.

[Pro Street]

Originally Posted by 6SpeedTA95

There's obviously need for more or the companies would be investing in it on their own. I'm ok with the government butting out of the markets but that means not taxing these companies as taxes are one of the biggest forms of market control. The leverege the government has through tax incentives and subsidies is huge and they're not doing much about this.

Honestly with multi billion net profits after taxes, the money could be spent on the company itself and not yachts and mansions

[RMNIXON]

They want to put a LNG terminal Off Southern California, but the Nimby's and Malibu Mansion Libs wont have it!

[mididoctors]

Boris
London

[6SpeedTA95]

Originally Posted by Pro Street

Honestly with multi billion net profits after taxes, the money could be spent on the company itself and not yachts and mansions

Dude the money is spent on the companies themselves....

[Pro Street]

Originally Posted by 6SpeedTA95

Dude the money is spent on the companies themselves....

[6SpeedTA95]

Originally Posted by Pro Street

[Pro Street]

Originally Posted by 6SpeedTA95

some of you conservatives think way to highly of businesses... seriously..

[6SpeedTA95]

Originally Posted by Pro Street

some of you conservatives think way to highly of businesses... seriously..

So you have nothing to offer? You should probably do more reading on the oil industry and on the big companies in the oil business. Exxon for example has spent BILLIONS of recent profits on paying down their debt/liabilities, you also need to read up on how expensive it is to be in the business. These companies dump billions upon billions into their businesses each year and they are also ramping up their alternative energy divisions as well, which at this point is excruciatingly expensive.

[Pro Street]

Originally Posted by 6SpeedTA95

So you have nothing to offer? You should probably do more reading on the oil industry and on the big companies in the oil business. Exxon for example has spent BILLIONS of recent profits on paying down their debt/liabilities, you also need to read up on how expensive it is to be in the business. These companies dump billions upon billions into their businesses each year and they are also ramping up their alternative energy divisions as well, which at this point is excruciatingly expensive.

I have plenty to offer.. it's just pointless. The BILLIONS spent paying debts and liabilities include things such as the Valdez spil.. these are NET profits, NET. not Gross. This is money that is left over.

again, NET profits.

dump those NET profits into LNG production, instead of pumping it back into the oil market.

Oil companies haven't increased production within the US in god knows how long. They'll continue to build wells ironically though.

Seriously, I can't fathom how you or anyone would say, "well they have billions in net profit every quarter, but we should give them MORE TAX BREAKS so they have more money to build LNG plants."

seriously, just

[6SpeedTA95]

Originally Posted by Pro Street