Understanding the Risks and Benefits of Importing Liquefied Natural Gas (LNG) Essay Example for Free

Understanding the Risks and Benefits of Importing Liquefied Natural Gas (LNG) Essay In April, 2009, the national headlines were dominated with the story of a small, rogue group of modern day pirates who somehow managed to hijack highly armed American ships off of the coast of Somalia; these pirates were motivated by the huge financial gains to be had by stealing from the ships that are used to import liquefied natural gas (LNG), petroleum, and other energy resources from around the world, but primarily the middle east, a highly volatile region of the world for decades (Cordesman, 2004). While in itself the magnitude of what a small group of determined individuals were able to achieve is horrifying in its impact, there is a larger issue which came to light in the midst of the incident. That issue is a fair examination of the relative risks and benefits, specifically, of importing LNG to the United States. With this issue in mind, this research will explore several key facets of the question. Upon completion of the research, a better understanding of the overall topic will have been gained. This topic is especially interesting, as it encompasses the sub-topics of the energy crisis of the 21st century, international political complications, and much more. Risks of Importing Liquefied Natural Gas To begin, it is important to truly understand the risks of importing LNG; as with so many other facets of this topic, there are a wide variety of aspects to consider when tackling this pivotal question. While the threat of terrorism aimed at the United States has been a factor for decades, in the aftermath of the horrors of the 9/11 attacks, a renewed level of concern emerged for the protection of domestic chemical storage and transportation facilities against possible acts of sabotage. LNG facilities were identified as potentially attractive targets for terrorists, as the destruction of LNG supplies could dramatically affect the productivity of the nation, and the general perception is that LNG is highly explosive, which in fact will be dispelled later in this research. At any rate, ships bringing LNG to the US, especially in a post-9/11 world, are ripe targets for terrorist attack, representing a tremendous risk to those who are involved in the actual transportation of imported LNG (Johnson, et al, 2005). While LNG may not pose a huge threat once it is brought onto land, there is evidence to indicate that in the transportation of LNG via the tanker ships which are used to transport it, in the event of an LNG spill at sea, the effects could be huge. Without the means to contain the spill if it were to occur hundreds of miles from any given nation’s shore, LNG, when expelled into the water, poses a huge risk to the plant and wildlife that lives at sea. Eventually, if the spilled LNG were to reach the shores of any land mass, there could likewise be a large amount of soil pollution and the like, effectively undermining the environmental effectiveness of LNG when it is properly used in its intended applications (Downs, 2000). Financially, engaging in the importing of LNG can also be a risky proposition; in the previously presented scenario, if LNG shipments are hijacked for example, a huge loss of money for many stakeholders. Although all businesses carry their own relative level of risk, the importing of something like LNG, which is a prime target for theft or destruction, is especially risky. Lastly, the effort on the part of modern day pirates to try to steal as much LNG as possible from shipments meant for American importing represents a huge risk to both the financial and safety aspects of the shipments themselves; while one would probably say that the US should simply take military action against any nation from which these pirates hail, the diplomatic implications are far more complicated than that. The specifics of these implications will be discussed in more detail later in this research. Benefits of Importing Liquefied Natural Gas As one would expect, there are benefits to importing LNG that make the risks worth the effort of taking them. First, it is critical to understand the value of imported LNG for the United States and Canada alike, as well as countless other nations across the globe. For the purposes of this research, however, the focus is on the United States and LNG. The fact of the matter is that the United States’ production of LNG has been declining for at least the past decade, the only exception being the state of Alaska which still represents a vital source of LNG. However, even taking into account the access to LNG from Alaska, the United States still must import almost 98% of its needed supply of LNG, by some estimates. Further, additional estimates project that this trend will continue until at least 2025, and after that point, it is very likely that 100% of the LNG needed by the US will have to be imported from elsewhere, as even the expansion of available LNG from Alaska will be woefully inadequate to meet American demand (Kelly, 2005). Not only has the American supply of LNG diminished in recent years, but the demand has also skyrocketed for a variety of reasons. One of the reasons for this increased demand is an increase in the population of the US, which naturally increases the need for LNG in many applications, including residential, commercial, industrial and military. Additionally, the desirability of LNG as an energy source has increased given the growing effort to utilize energy sources which have very little impact on the environment, and the earth-friendliness of LNG makes it highly desirable for a way to provide energy without causing pollution, global warming and the like (Melamid, 1994). This research would be seriously lacking if at least some consideration was not given to the economic benefits of importing LNG for those whose product itself is LNG. As many people have realized in recent decades given the increase of political volatility in the middle east, this mostly desert, barren and hot part of the world is lacking in many of the natural resources that other nations use to support agriculture and other industries, this part of the world is highly dependent on the revenues derived from the export of LNG and other gas/oil products. Because of the reliance on this stream of income, the nations of the Middle East have in fact collaborated on the controlling of supplies and prices of LNG (Cordesman, 1997). While the details of the Middle Eastern situation will be discussed elsewhere in this research, suffice it to say at this point that there is tremendous benefit for the Middle East to continue to deal in LNG. Conversely, those who are involved domestically with the importing of LNG, there is a multi-billion dollar industry of opportunity to be reaped. The equipment alone to transport, store and dispense LNG represents a tremendous industry, employing hundreds of thousands of Americans. This is in addition to the endless number of end-users who use LNG as one of the factors of the production of other goods; as was mentioned earlier, this phenomenon will only increase with time, as the increased awareness of environmental responsibility will increase the desirability of LNG as a source of energy. While the environmental benefits of LNG have been mentioned several times already, this point deserves additional discussion as one of the many benefits that LNG provides. Not only is LNG a low impact element in terms of causing potential harm to the environment, relatively speaking, it is also quite safe in terms of its volatility. Unlike gasoline, for example, LNG is not highly explosive, and in fact, if LNG were to be ignited by an open flame, it would actually only generate a small, localized fire which in fact could be easily fought and contained. In the event of an LNG spillage, its nature as a dense gas makes it something that would only spread if it were hit by a hard, driving wind. Moreover, LNG is visible when released into the air, making it easy to avoid if it were to be spilled in large quantity. With the safety factor of storing LNG in mind, as a matter of fact, American storage facilities for LNG are required to have a sizeable safety zone of vacant land around them so should a leakage take place, the risk to the general population would in fact be nominal (Melamid, 1994). Environmentally, financially, and industrially, LNG importation has been seen to have many benefits which are substantial. However, in fairness, it is also important to discuss the effects that the importation of LNG has on other facets of everyday life, as well as international relations, homeland security, and much more.