Overseas hunting puts gas industry in turmoil

The U.S. natural gas industry is in the midst of a turbulent transformation as petroleum giants such as ChevronTexaco and ExxonMobil increasingly hunt fuel overseas, leaving smaller players scrambling to pick up the slack domestically.

The shift exacerbates an already constrained market in which supplies have been tight and prices high amid rapidly declining productivity in the nation's aging natural-gas fields, analysts and industry officials said.

Over the past two to three years, "there has been a major de-emphasis on the importance of exploration in this country" by the world's largest petroleum companies, said Rhone Resch, vice president of energy markets at the Natural Gas Supply Association, a Washington-based trade group. "That results in fewer new fields that are going to bring significant new supplies."

The transition has benefited smaller companies struggling to make up the difference as a result of high prices, boosting profits and stock prices. Yet it has come at the expense of homeowners and industrial users, who could see high energy bills for several more years.

Longer term, however, America will gain access to vast international supplies that should help ease the current crunch, analysts and executives said.

Indeed, as the biggest players expand natural gas production in countries such as Indonesia, Nigeria, Qatar and Russia to boost reserves and please shareholders, they do so with the understanding that a significant portion of this fuel will eventually be exported to America.

"That's what the future holds for natural gas," said Robert Ineson, a Houston-based director at Cambridge Energy Research Associates.

Trouble is, the United States currently has limited infrastructure to support the growing intercontinental trade for natural gas. To get it across oceans, the fuel must be cooled to its liquid state, shipped in refrigerated tankers and then "re-gasified," so it can be piped to homeowners, power plants and manufacturers.

There are just four U.S.-based terminals today that can receive tankers carrying liquefied natural gas, or LNG.

Deseret News graphicBumpy transition for natural gas industryRequires Adobe Acrobat.

While roughly 30 new LNG terminals have been proposed and LNG imports are expected to quadruple by the end of the decade, it will be several years before substantial new capacity is added. Keeping up with rising demand between now and then will be tough, experts said.