When Brian Jeffries, executive director of the Wyoming Pipeline Authority, first got into the natural gas business in 1979, the long-term outlook wasn’t great.
The father of Jeffries’ college roommate gave him grim advice. Get out of the gas business.
At the time, remaining national reserves of gas — reserves producible with given technology and existing demand — was about 10 years, Jeffries recalled.
Technology has changed all that, driving a gas boom across the country over the past decade. More recently, the opportunity to export U.S. natural gas to other countries by cooling it to a liquid and shipping it overseas has spurred excitement in new markets and better prices.
On Monday, the Energy Information Administration noted that the United States export capacity for liquefied natural gas will likely become the third largest in the world by the end of 2019, behind Australia and Qatar.
Based on current estimates, natural gas reserves could last for another century.
The direct impact on Wyoming as ports open up on the Gulf Coast to take liquefied natural gas — gas that’s been cooled to minus 260 degrees Fahrenheit so that large volumes can be transported long distances — to new markets is price improvements, said Jeffries.
“With a robust LNG export capability, it creates a large new market for North American LNG,” he said.
Nationally, natural gas prices have been depressed for some time, though this winter record low natural gas storage has kicked the market into high gear, with the national spot price doubling over the last two months. This is the first time since 2014 that prices climbed over $4 for an extended period of time.
The price jump will likely be short lived.
“This season is looking, unfortunately, to be a little bit of a fluke,” said Michael Land, head of marketing for Casper-based Kirkwood Oil and Gas. But while the prices for natural gas haven’t been robust for some time, LNG potential continues to woo Rockies producers hoping that could change.
“I’m still excited about LNG,” Land said. “The price you can get for LNG is fantastic. A lot of that stuff just gets exported to Asia. They pay, because their livelihood depends on it.”
Much of the hype about LNG come down to the expansion of an export industry on the Gulf Coast, with the Sabine Pass terminal in Louisiana making its first shipment in early 2016. A facility on the Georgia coast, Elba Island LNG, is expected to be operational by the end of next year, and four more LNG terminals on the east coast have received approval from the U.S. Federal Regulatory Commission and the U.S. Department of Energy, according to the EIA.
Those terminals are a long way from Wyoming, but they are good for the national gas market, said Jeffries of the Wyoming Pipeline Authority.
There have been in the past, and continue to be, talks of locating an LNG port on the West Coast — a potential boon for Rockies producers and states like Wyoming that would benefit from a shorter distance to Asian markets.
The parent company of the Jordan Cove Energy Project is currently trying to obtain approval from federal regulators to move forward with a liquefied natural gas port in Coos County, Oregon.
“The fastest growing markets are in Asia Pacific, the biggest basins that can be tapped, in my opinion, are in the Rockies,” said Michael Hinrichs, a partner in Pioneer Group LLC, during a recent private meeting with Gov. Matt Mead. Pioneer was seeking Wyoming support for the proposed export facility as it goes before the FERC.
“They can’t get out through the Gulf Coast like they could through Jordan Cove, and you wouldn’t have the competition with these bigger natural gas plays in the east,” Hinrichs told Wyoming’s governor.
If Jordan Cove moves forward, it would add to the rising-tide-floats-all-boats phenomenon already taking place with LNG’s expansion. Wyoming would enjoy lower transport costs getting to the West Coast compared to the ports in the eastern United States, he said.
Stemming the price drop
Gas markets have changed dramatically with new technology, unleashing gas across the country. The downside of that incredible growth is that there is so much gas available. The bust in gas prices that resulted from oversupply took a chunk out of Wyoming’s revenue in recent years and drove the coal-bed methane industry in northern Wyoming to its knees.
But LNG offers an opportunity to stem continued price declines, Jeffries said.
It might not be a dramatic increase, Jeffries said, noting studies from the Department of Energy that found a potential 20-cent bump on the national spot price from LNG expansion.
The rise in price may get lost in the noise of seasonal fluctuations, Jeffries said. But it’s not just about the price bump, he said. It’s about keeping the price from going down as natural gas production keeps coming.
“It wasn’t that this was going to change prices by a dollar or two dollars,” he said. “Its greater impact was a minor impact in price while mitigating a substantial price (decrease). You’ve held the bad news at bay.”