Posted on April 16, 2013 at 5:20 pm by Emily Pickrell in LNG, Natural Gas, North America
Higher capital costs for new liquefied natural gas projects and government barriers may be holding back the industry from providing needed resources to new markets, a panel of industry experts said Tuesday afternoon at the LNG17 conference in Houston.
While natural gas has become abundant in the United States, the technology needed to transform it into a liquid that can be transported is still an expensive proposition and the federal government has been slow to approve export facilities.
“We are trying to stem the increase (in costs) so that we can become competitive and meet our needs for a reasonable rate of return,” said Richard Guerrant, vice president for ExxonMobil gas and power marketing.
Guerrant explained that in order for LNG exports to Asia to be profitable, the international price of LNG must cover the cost of processing and transportation, a differential that is pressuring Exxon to invest in the most advanced processing technologies.
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But these technology advancements are making new projects stunningly expensive. Chevron recently raised its estimate of its Gorgon project in Australia to $54 billion, saying that labor shortages and bad weather were continuing to raise costs.
“The types of projects are an order of magnitude more expensive and the cash flow profile is different,” Guerrant said, explaining that many of these projects must be financed upfront because of their unconventional and risk nature.
Net imports of liquefied natural gas decreased by 1.9 percent in 2012, which panel experts...