A Fast Fix for a Scarce Fuel

Liquefied gas is filling the gap, at enormous expense

Long as three football fields, buoyant as a bobbing cork, the El Paso Sonatrach will cruise into Chesapeake Bay next week on a historic voyage. The $100 million tanker will tie up at Cove Point, Md., a once bucolic spot on the western shore of the bay. There, it will discharge liquefied natural gas (LNG) from Arzew, Algeria, into the nation's first superport designed specifically to receive LNG.

That will merely be the start. Until now, LNG has arrived in the U.S. only in the form of small shipments made to Boston's Distrigas Corp. to supplement supplies during New England's chilly winters. But from next week on, one of a fleet of nine El Paso tankers will deposit LNG at Cove Point roughly every 60 hours. There, the supercold liquid, which arrives at a temperature of 259DEG F. below zero, will be heated until it turns back into gas, then piped through the networks of Columbia Gas System and Pittsburgh-based Consolidated Natural Gas Co. to 7 million Eastern customers.

Much more may follow. To gas distributors, the logic of importing LNG seems irrefutable. Natural gas is a clean-burning fuel that is relatively scarce in the U.S.; in many foreign countries it gushes out of oilfields in great volume, but is burned off because there is no local market for it. Granted, it cannot be piped across the oceans, but why not liquefy it to one six-hundredth of its normal volume and haul it to the U.S. aboard ship?

The Cove Point plant is only one leg of an immense project known as El Paso I. The other leg is a terminal now under construction at Elba Island, near Savannah, Ga., that this summer will begin taking in 350 million cu. ft. of liquefied Algerian gas daily. The two terminals together will receive 1 billion cu. ft. a day, a rate sufficient to heat the homes of 9 million Americans.

The Department of Energy also has approved plans to land Algerian LNG at Lake Charles, La., and LNG from Indonesia in California. It is considering permitting more LNG to be shipped into Texas and, with Canadian approval, New Brunswick, Canada--from which Tenneco would pipe gas into New England. George H. ("Bud") Lawrence, president of the American Gas Association, predicts that by 1985 the U.S. will be importing altogether 1.6 trillion cu. ft. of gas a year in liquid form, or one-tenth of all the gas it will burn then. Chase Manhattan Bank experts put 1985 imports at 2.2 trillion cu. ft.

Maybe--but there are serious obstacles. Though President Carter's national energy plan calls importation of LNG an "important supply option," and the Department of Energy has been approving import projects, officials have serious doubts about the strategic wisdom of allowing too many American consumers to become dependent on the stuff, lest LNG be included in another oil embargo. They are hardly encouraged by the fact that the principal U.S. supplier will be Algeria, one of the most hawkish of the OPEC countries and a nation ruled by a left-wing government that is anything but an ally of the U.S. in foreign policy. Says one senior Energy Department official: "I feel strongly that we shouldn't get hooked on an other imported source of energy. It's dreadful."

Another problem is price. According to Iranian Premier Jamshid Amouzegar, LNG costs five to six times as much to ship as oil. And that does not count the formidable expense of conversion and storage terminals; the terminal at Cove Point cost $370 million. Algerian gas costs $2.37 per 1,000 cu. ft. to deliver to East Coast users; Indonesian LNG will cost, $3.42 delivered in California.

Gas distributors want to "roll in," or average out, the higher priced imported LNG with the price of domestic gas, currently held by federal regulation to $1.48 per 1,000 cu. ft. tops. That would hold down the price somewhat, but force the vast majority of customers who will not burn imported gas to pay part of the cost of supplying LNG to those who actually use it. That is indeed the basis on which the first LNG imports have been sold, but Energy Secretary James Schlesinger has denounced the plan as constituting a subsidy for imports. He favors "incremental" pricing--that is, making the people who actually use LNG pay the full cost of importing and converting it. The Government may well force incremental pricing --but will consumers pay?

Finally, there are safety worries. A report by the General Accounting Office due for publication in May takes a dim view of locating LNG terminals in highly populated areas, because of the possibility that leaking liquid might vaporize, ignite and form a deadly fireball. Gasmen retort that no one has ever seen such a fireball. John Cabot, chairman of Distrigas, scoffs that a catastrophe is "a lurid image in search of a believable scenario." Whatever their ultimate volume, though, LNG imports are sure to rise; they constitute a supplemental form of energy that the U.S. simply cannot spurn.

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