Houston Chronicle: Tusiani, Shearer – Too many eggs in the Gulf Coast export ‘basket’

7 June 2017 Recent calls by the Trump administration for further expansion of energy exports, and especially of liquefied natural gas, should give rise to concern over the massive concentration of energy and petrochemical projects on the Gulf Coast. This places most of these planned exports into a small region of the country whose ports are vulnerable to closures and restrictions. This is a serious problem, putting the huge potential growth of U.S. exports at risk. While hurricanes might seem the most obvious threat, fog is a greater one. For instance, the Houston Ship Channel, the largest export waterway in the country, has been closed by fog for up to 30 days per year over the last five years. Continuous silting of channels, lack of dredging combined with shipping accidents (such as collisions and groundings), also lead to congestion and disruption. Last year, a study by Risk Management Services found that six of the 10 global ports most at risk for catastrophic loss are located on the Gulf Coast. The latest data from the U.S. Army Corps of Engineers show about 16,000 large ships call at U.S. Gulf ports each year. Houston alone accounted for more than 5,000 of them. This activity will expand dramatically. The four LNG plants already under construction will produce more than 1,000 cargoes annually. But this is just the tip of the iceberg. If all the proposed projects materialize, which is unlikely, the region could host up to 20 LNG export facilities within a decade, accounting for 6,000 cargoes per year valued at more than $100 billion. By contrast, in 2016 the U.S. exported just 57 LNG cargoes. The 36-mile Calcasieu Ship Channel, home to the Port of Lake Charles in Louisiana, is the site of eight of these proposed LNG projects. Their combined export capacity equates to 1,800 cargoes a year, quadrupling existing traffic. Channel restrictions for LNG tankers make congestion and delays inevitable. Given the narrow width and limited depth of the Calcasieu River, LNG tankers will need to travel in small one-way convoys. Waiting times for LNG tankers at the port entrance could range between six and 24 hours, and much longer in adverse weather. Similarly, LNG exports from the Port of Brownsville could cause a 10-fold increase in traffic. These projections do not account for the numerous proposed expansions of other energy and petrochemical facilities depending on these ports. Some of these limitations could be mitigated by dredging and maintaining deeper and wider channels. However, permitting delays and inadequate funding make achieving these expansions difficult. The issue of congestion does not stop once the tankers leave the Gulf Coast. Although the Panama Canal shortens the distance between U.S. and Asian markets, it also presents limitations (lock and traffic rules, etc.). Under current restrictions the Panama Canal can handle, at most, one LNG tanker from the U.S. per day. This surge in LNG export activity is heavily centered in the Gulf because projects are taking advantage of low-cost natural gas supply and infrastructure developed when the region was at the heart of the nation’s gas production. Ironically, today, one-third of U.S. gas originates from Marcellus and Utica shale in the Northeast. The Trump administration is correctly advocating for diversification of exports away from the Gulf Coast. There is no doubt that an LNG facility on either or both coasts makes good sense. It would create employment and expand the nation’s vital export infrastructure. While these objectives are admirable, industry has largely given up on developing projects on these coasts in the face of a hostile climate for securing permits at the state and local levels. The White House needs to take steps to address these issues sooner rather than later. It will take a combination of providing additional funding to protect and improve the Gulf coastline and ports, and the federal government’s willingness to override the endless delays and obstruction at the state and local levels on the Northeast and West Coasts. Turning talk into action will be the challenge. Until then, the country will continue to place too many of its export eggs into the Gulf Coast basket. May the future bring clear skies and calm waters less the basket topples over. Tusiani and Shearer, both employed by Poten & Partners, are co-authors of “LNG: A Nontechnical Guide,” (PennWell, 2007) and its second edition, “LNG: Fuel for a Changing World” (Penn Well, 2016).   To read the article from the original source, please click here.