Hartford Business
Connecticut’s reliance on Middle Eastern fossil fuels surges way beyond petroleum; the state’s true addiction is natural gas.
Claims that natural gas is a cheaper and/or cleaner alternative to oil and coal largely are true; but those hoping that shifting to natural gas will reduce the state’s dependence on foreign fuel — especially from the pesky, unstable Middle East — will be disappointed.
The Middle East supplies only 0.5 percent of America’s natural gas, but the number is at least 10 times higher in Connecticut and rising.
The latest increase in Middle Eastern natural gas fueling Connecticut came in October from a liquefied natural gas, or LNG, facility in New Brunswick, Canada. Facility majority owner Repsol inked an agreement with a company based in Qatar for its LNG, which is then gasified and sent to New England. Qatar — a country on the Persian Gulf — joins Egypt, Peru, Norway and Trinidad & Tobago as the facility’s suppliers.
“Qatar gas makes up for a reduction in what was coming in from Canada,” said Mary Usovicz, spokeswoman for Repsol North America.
Connecticut’s reliance on foreign LNG will plummet — just like it has in the rest of the nation — as the benefits of newly available domestic natural gas in the Midwest are fully realized; but because New England is at the end of the country’s transmission system, those benefits will be slower coming.
“Everybody is so excited that we have this gas supply so close,” said Lisa Cullen, manager of supply for Yankee Gas, Connecticut’s largest natural gas utility. “We have to work to get more of it over here.”
Until the full benefits are realized, Connecticut must rely on LNG at a disproportionate rate to the rest of the nation. LNG accounts for 2 percent of all natural gas in the United States and 20 percent in Connecticut, according to Yankee Gas. The main ports for Connecticut’s LNG are the Repsol facility in New Brunswick and another in Everett, Mass., which relies mostly on Trinidad & Tobago for its LNG.
Even though the Middle Eastern natural gas seems like a relatively small portion of Connecticut’s portfolio, it is roughly equivalent to the proportion on the nation’s petroleum portfolio that comes from the Middle East, which is perceived as influencing America’s prices and politics.
The principal supplier of America’s oil is America, accounting for 43 percent, according to the U.S. Energy Information Administration. Coming in second is Canada, at 11.5 percent. Third is Saudi Arabia at 7.9 percent. No other Middle Eastern country ranks in the top six and the only others in the top 15 of U.S. oil suppliers are Iraq and Kuwait.
The push for Connecticut to decrease its reliance on oil starts with natural gas. Over the past 50 years, the use of natural gas in home heating increased 164 percent while the use of fuel oil decreased 18 percent. Natural gas power plants produced 1,331,000 megawatts of electricity in July, triple all other fossil fuels combined.
Even in cars, the push is for natural gas. Gov. M. Jodi Rell achieved several victories in bringing to plug-in electric cars to the state, which in Connecticut run on power generated mostly by nuclear and natural gas. In October, the City of Meriden opened a LNG fueling station for cars that run strictly on natural gas.
Connecticut’s commitment to natural gas comes at a cost. Residential prices of natural gas have increased 64 percent over the past 20 years, putting the state at No. 6 in the nation for prices. It’s still cheaper than fuel oil — the state ranks No. 5 in fuel oil prices — which has increased 137 percent over 20 years.
The state also ranks No. 3 in the nation for electricity prices, due in part to Connecticut’s reliance on natural gas for electricity generation. That’s an improvement, though, as the state used to rank No. 2 in electricity rates, but the prices have dropped for more than a year as natural gas prices have dropped.
As the demand for natural gas in Connecticut grows, the prices will improve, said Edna Karanian, Yankee Gas director of gas system operations.
Further dampening prices is the increasing availability of the large domestic natural gas supply trapped in Marcellus Shale in Pennsylvania, New York and West Virginia. As the technology to harvest it got more economical, the Marcellus Shale natural gas became cheaper than even other supplies of domestic natural gas — such as from the Gulf Coast — and already has contributed to the falling price of the commodity.
“This is probably one of the more exciting times in the business,” Karanian said. “Any time new supply comes into an area, it has a positive impact.”
The Marcellus natural gas eventually will become the principal supply source for Connecticut and drive down prices — Yankee Gas is predicting a 59 percent in its winter premiums over the next five years — but the proposed expansion of its transmission system to more widely use the commodity doesn’t include Connecticut.
Connecticut is a potential customer for use the Marcellus natural gas, but the current demand isn’t high enough to make a new pipeline capacity project economically viable, Karanian said. Yankee Gas may start a transmission project of its own or make it a joint venture to boost the shale natural gas use in the state.
“It is truly a game-changer here in New England,” Cullen said.
Because of the widespread use of domestic shale natural gas, the amount of foreign LNG used in the country is far less than predicted, said Damien Gaul, economist with the U.S. Energy Information Administration. Natural gas coming from foreign sources hit a 15-year low nationally in 2009.
“The LNG producers (such as Qatar and Egypt) don’t really care because they are making a lot of money elsewhere in the world,” Gaul said. “There may come a time when they want a bigger portion of the U.S. market, but not now.”
Qatar, with two major LNG companies, is undergoing a major expansion of its natural gas exports. After Russia and Iran, Qatar sits on the world’s third largest natural gas supply; and the country’s monarch has called for the expansion its current LNG export of 44 million tonnes — a metric cubic ton — to 77 million tonnes. Qatar already leads the world in LNG exports
While Qatar’s overall exports to the U.S. makeup about 0.2 percent of its total exports, part of that expansion includes the deal with Repsol for the LNG port in New Brunswick.
Since that port opened in 2009, it has sent more than 100 billion cubic feet of natural gas to the U.S. Northeast. This increased use of the Canadian pipeline into the United States has helped shave off peak prices in the high demand months by increasing the supply availability, Usovicz said.
“Having gas come from the north is a positive thing,” Usovicz said.
