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Gas Shale Changed LNG Market Not Opposition

Last week Hess Corp. announced it was withdrawing its application to construct an LNG receiving terminal in the Providence, Rhode Island area.  A local newspaper congratulated itself that its editorials helped mobilize the opposition it credits with stopping the terminal.  Not surprisingly, New England has little appreciation for the energy business, except when oil prices go up, and the changes that have occurred in the natural gas market due to the success with gas shales. 

From the January 2004, the date of the paper's first editorial, through May 2011 (latest EIA data available), monthly U.S. natural gas production increased by 17%.  Over the same period, gas consumption fell by 17.3%.  Maybe more important in Hess's thinking is the outlook for LNG as set forth in the 2011 Annual Energy Outlook issued by the EIA earlier this year.  It projects that annual natural gas production between 2009 and 2035 will increase by 25.6%, while imports are projected to decline by 24.9%. 

Based on the gas supply outlook, Hess made the right business decision to abandon the LNG terminal.  Rhode Islanders will benefit from the cheap gas coming from the Marcellus formation, or from other U.S. shale production, but they better hope the supply continues to grow as the state is totally dependent upon imported energy to power its economy.