New York – Gazprom's John Hattenberger may stoke some controversy when he shares his views on Ukrainian-Russian relations.

But the president and managing director of Gazprom Marketing and Trading USA Inc. doesn't shy away from stirring the pot a little when it comes to the liquefied natural gas (LNG) versus unconventional shale gas debate either.

Contrary to what some experts think, Hattenberger believes LNG has a very bright future in the United States, one that has been overlooked in part by recent media hype about shales and other domestic sources of energy.

"I don't think LNG has waned," he said. "The shale stuff has come in and gotten a lot of spark and a lot of press . . . (LNG) is getting less press, I think, because the shale is a lot more exciting because it's domestic."

Hattenberger spoke with Perspectives on the sidelines of the GasMart 2009 conference in Chicago.

LNG, by contrast, is coming out of places from countries as diverse as Qatar, Egypt, Indonesia and Australia. But LNG has been a player since 2000 and "hasn't slowed down a lot," Hattenberger said. It's a major piece of the energy puzzle in the United States and is also "hugely growing," he added.

The United States has historically been relatively "isolated" when it comes to natural gas, he said. But he suggested that may change as the natural gas market is rapidly becoming more global.

The U.S. will probably become less and less isolated, he argued. As proof, just take a look at the increased LNG terminal construction activity over the last few decades, Hattenberger reasoned. Thirty years ago, there were only four terminals, built in the seventies, and largely under-utilized. "For a long time, they didn't get used because the price wasn't enough to attract that much (LNG)," he said. In the last five years, however, six big LNG re-gasification projects have started up. Hattenberger put the total number of LNG terminals in North America at roughly 10, but he cautioned that was merely an informal count.

And LNG isn't just being imported into North America. It's also being exported from the Continent, especially to countries in the Far East, said David J. Slater, managing director of Nexen Marketing USA Inc., a unit of Canadian energy firm Nexen Inc.

The Kitimat LNG terminal in the province of British Columbia is set to be retooled to liquefy and export natural gas as more and more shale gas is found in plays such as the Montney and Horn River areas of western B.C. along the province's border with Alberta. With changing royalty policies making Alberta a less desirable place to drill, B.C. is increasingly becoming a "bright spot" for Canada's gas prospectors, he noted. "This region is going to be awash in natural gas," he said.

"Tremendous" cost pressures are also finally starting to ease in the energy sector, he added, which will help producers make more capital investments.

But Perspectives digresses . . . back to LNG!

Kitimat sending Canadian shale gas to Asia could be a "paradigm changer" in North America, Slater said. Exports from Kitimat "are a ways away" — likely not until 2013, he said. But Asian markets use a different basket of prices to value LNG. The end result: LNG prices there are more tied to oil tags than natural gas tags in North America.

"It's a very different pricing mechanism than what domestic North American gas is priced against, and I think that's going to be an interesting proposition to certain producers who are looking at the long-term price for their production and where they would want to go to achieve the maximum value for that production," Slater said.

It's something that deserves some close monitoring because it has the potential to take power away from a Nymex-based price in North America to a more global pricing model.

And Kitimat will probably be quick to market the possibility of higher prices, or at least more diversified prices, to natural gas producers in B.C. and Alberta, Slater said. "At the minimum, it would be a diversified price tied more to oil than the Henry Hub price," he said on the sidelines of the conference.

Slater said the Kitimat export project was a "surprising" development, one his company had not been expecting. "It's quite an innovative project and not something we've seen in North America at all," he said.

But not everyone thinks the sky is the limit for LNG, including some at firms that already have experience in the field. Count among them William Hussey, senior vice president of origination at ConocoPhillips Gas and Power, Houston.

Buyers may be able to sock gas away now for this winter at low prices, Hussey said. But he warned they shouldn't count on the same situation next year, especially as rig counts and supplies dwindle on the back of low natural gas tags. That's doubly true if demand improves, he said.

But he added a couple of caveats.

"Everything I have just said is completely worthless if demand continues to fall. Then supply falling won't have an impact," he said. LNG coming in "in a big way" could also throw his projections off, he acknowledged.

"I personally don't see either one of those things happening," he said.

Why?

His company's LNG terminal at Golden Pass off the coast of Texas, for example, was supposed to have 2 billion cubic feet a day of LNG coming in this year. "And I tell you, it's not," Hussey said.

reprinted with permission from American Metal Market.