Welcoming Remarks by Secretary of Energy Spencer Abraham

Thank you, Bob, for that generous introduction. I am honored to join with all of you this morning. Let me begin by saying that it gives me great pleasure to welcome you here to Washington for the LNG Ministerial Summit.

Many of you have traveled a long way to be here and I very much appreciate the efforts you have made to attend this very important meeting.

I also want to thank the United States Energy Association for your hard work in organizing this Summit.

Once again, you have done an outstanding job. And because of your efforts, I am certain that the next two days will be extremely informative and productive.

Ladies and gentlemen, this conference has its roots in a report I received earlier this year from the United States National Petroleum Council. The NPC delivered a comprehensive analysis of supply, demand, and the infrastructure for natural gas in North America in the near, mid, and long term.

Its findings were sobering.

While noting that natural gas will play an increasingly central role in helping us meet our domestic energy needs, it warned that – and I quote – “North America is moving to a period in its history in which it will no longer be self-reliant in meeting its growing natural gas needs; production from traditional U.S. and Canadian basins has plateaued.”

The NPC’s report provided a number of helpful recommendations for moving forward to meet America’s long-term natural gas challenges.

These include increased energy efficiency and conservation; alternate energy sources for industrial consumers and power generators, including renewables; gas resources from previously inaccessible areas of the United States; and gas from the Arctic.

The NPC report also called on us to pursue an increase in imports of Liquefied Natural Gas.

Which brings us here this week – a major international convention to put the spotlight on LNG‘s potential as a major contributor to the world’s energy supply … and more specifically, on its potential to help the United States meet our growing need for natural gas as we move forward into the 21^st century.

Consider how quickly and how dramatically international energy markets can change. We have come a long way since the 1980s, when the “gas bubble” provided seemingly inexhaustible supplies of domestic gas at low prices.

The advantages of natural gas at the time – supply, price and, most important, low polluting emissions – soon made it the most popular of fuels, the “fuel of choice.”

Its popularity rose to such an extent that nearly every new power plant built in the United Stats over the last 10 years is powered by natural gas. And even with today’s high gas prices, many new power plants now in the planning stages will also be powered by natural gas. With demand for natural gas growing so rapidly, we soon saw the inevitable: tightening supply and rising prices.

The Energy Information Administration forecasts that during the next 20 years natural gas will be the fastest growing component of world energy consumption. 

In fact, between 1999 and 2020, consumption is projected to nearly double from 84 trillion cubic feet to 162 trillion cubic feet, representing 28 percent of the world’s total energy consumption.

And the growing demand for natural gas in developing countries -- nearly five and one half percent per year -- is expected to account for the lion’s share of the world’s growth rate of just over three percent.

Fortunately for all of us – consumers as well as producers – there are abundant reserves of natural gas around the world: 5,500 trillion cubic feet of proven reserves alone, and much greater potential reserves.

Add in the fantastic potential of methane hydrates, which the Department of Energy is studying closely, and we can confidently assert that the reserves exist to supply a growing demand for natural gas for many decades to come.

Unlike today’s market, however, the market of the future will increasingly be supplied over water, by ships carrying Liquefied Natural Gas.

As we meet today and tomorrow to discuss the potential of LNG, we are fortunate that we are not starting from scratch.

Consider LNG’s history over the past six years.

In 1997, nine countries shipped less than four trillion cubic feet of LNG. Last year, 12 countries shipped 5.4 trillion cubic feet of gas.   The world’s producers and consumers recognize the possibilities. At least 10 producing countries are either building or planning to build new gas liquefaction capacity, and another 10 consuming countries are building or plan to build new regasification capacity.

Based on facilities under construction, we expect global LNG liquefaction capacity to increase by more than 40 percent by 2007.

By that time, new ships joining the LNG fleet will have increased today’s shipping capacity by 44 percent.

In the United States alone, LNG imports are expected to more than double this year compared to last year, accounting for about 2 percent of our total natural gas consumption. The Energy Information Administration forecasts that our LNG imports will increase from this year’s projected 540 billion cubic feet to more than 2.2 trillion cubic feet in 2010, accounting for more than 8 percent of our total natural gas consumption.

LNG clearly is going to be a large factor in the world’s future energy equation. And the presence here at this Summit of the Prime Minister of our valued LNG trading partner Trinidad and Tobago and energy ministers and delegations from 18 producing countries, as well as executives from prominent private sector companies, is proof of just how quickly the LNG market is growing.

The long-term prospects for LNG trade to aid in meeting America’s and the world’s natural gas needs are extremely encouraging.

This conference serves as an appropriate call to action for all of us to move forward – to take steps to get new terminals up and running, to develop new fields around the globe, and to come together in partnership on mutually beneficial, long-term agreements.

The necessity for us to take long-term action has been reinforced in recent months.

Last spring, for example, the United States experienced lower-than-normal supplies of natural gas in underground storage. 

Concern about these storage levels prompted me to call for an emergency meeting of the National Petroleum Council, which was held in June.

That conference was instrumental in helping to raise the awareness of industry and the public to the potential problems that could result this winter if natural gas storage levels were not increased.

Thanks to a number of factors – including major conservation efforts by the energy and manufacturing sectors, a generally mild summer, and, to a lesser extent, programs such as the Department of Energy’s Smart Energy campaign – by early fall gas storage levels increased to well within the five-year average.

While this was quite an accomplishment, it did not ensure adequate supplies of low-cost gas for the upcoming winter, as we’ve seen in the last few weeks.

Initial indications appear to suggest that the recent price spikes have something to do with the weather.

Early and extended cold temperatures throughout many parts of the country seem to have accelerated the cyclical demand for natural gas.

Meanwhile the increased drilling we have seen since last spring isn’t having the effect we had hoped. According to an analysis I recently saw from Raymond James & Associates, production is down, despite the fact that more wells being drilled.

All of this underscores the need for Congress to pass a comprehensive energy bill.

The legislation being considered by Congress right now contains many important provisions that will assist in strengthening our long-term energy position. Not the least of these are measures to boost production and bolster our aging energy infrastructure.

If Congress passes the energy bill, we can look forward to a day when the likelihood of these price spikes is greatly alleviated.

Until that happens, we should all be taking actions that can ameliorate these episodic bouts of high prices and short supply.

We may not be able to control the weather, but there are elements over which we do have some leverage.

That’s why I am again calling on the energy industry, on the nation’s manufacturers and other large consumers of natural gas, and on the American people to engage in more careful and efficient uses of energy.

We must rely on measures such as these in the short term while we take the appropriate steps – as with an energy bill, or through Ministerial actions like this summit – to bring about long-term stability to the natural gas market.

Once again, and on behalf of President Bush, let me welcome everyone to this critical gathering of energy leaders, consumers, and policymakers.

The discussions we engage in at this summit will have far-reaching consequences for generations to come.

Over the next two days, I look forward to all of us working together on a host of issues, such as the development of worldwide product quality standards; the development of a workable spot market mechanism; increased measures to guarantee the safety of transporting LNG; and the development of solutions to issues surrounding the siting of LNG facilities that will confront both producing and consuming countries. 

We are in the beginning stages of a long and very complex project to accomplish nothing less than the creation of an immense, global industry.

There will be many difficulties to overcome in the months and years ahead.

But the potential rewards for all of our countries and all of our people are too great to let this opportunity pass.