Oregon gas terminals' futures hang on global supplies

Five years after energy developers started sniffing around Oregon as a likely spot to build an import terminal for liquefied natural gas, the air has come flooding out of the gas market like a whoopee cushion, making such proposals sound economically reckless.

With a worldwide recession in full swing, there’s LNG to be had. More cargoes are expected to land this year in the U.S. — the industry’s market of last resort — even though demand is low and gas prices have cratered.

Yet existing U.S. LNG import terminals are operating at a fraction of their capacity. New terminals, including one in Mexico’s Baja California, are sitting virtually idle. And the forecast for U.S. gas production and reserves is robust, thanks to new drilling techniques that allow producers to tap unconventional reserves.

The new market realities raise questions about the viability of the three LNG terminals proposed in Oregon. Analysts are skeptical there will be enough supply in the Pacific Basin to assure a regular flow to the Northwest, or that gas prices will be consistently high enough to make it attractive to land cargoes here. They’re not sure who would finance a billion dollar terminal in Oregon, or spend hundreds of millions more on a pipeline.

“I don’t see it at all,” said Andrew Flower, a United Kingdom-based LNG consultant who follows industry facilities around the world. “I don’t see how these projects work or where the need is for them. I’m amazed at the tenacity of some of these people who are still pushing forward.”

The Oregonian