Thank you and good morning. It’s a pleasure to be here with you to discuss the potential of LNG for the Americas.
 
LNG plays a critical role in the United States' energy planning – and the rapid development of a global LNG market is expected to deliver significant benefits in energy security, increased international trade and improved relationships for producers and consumers of natural gas around the world, including the Americas. In fact, and this is perhaps the main point of my remarks this morning, growing demand for LNG in the United States should serve as the catalyst to drive the development of natural gas resources and infrastructure throughout the Americas.
 
Energy security is a foundation stone for economic growth, rising standards of living, improved health and peaceful relations among nations. LNG is fast becoming a vital contributor to U.S. energy security – and could and should grow to be an important contributor in the rest of the Americas, as well.
 
A quick look at the long-term, worldwide natural gas supply-demand situation will help to explain why.
 
According to the Energy Information Administration’s latest forecast, natural gas is expected to be the fastest growing component of the world’s primary energy consumption, increasing by an average of more than 2 percent a year through 2025, and is expected to account for nearly a quarter of all energy consumption. Worldwide consumption is expected to increase to 150 Tcf by 2025, 70 percent higher than 2001’s consumption of 90 Tcf.
 
The market for natural gas is booming, and the fastest growth in demand – 3 percent a year – is expected in the developing world. Fortunately for everyone, production in the developing world is expected to comfortably exceed consumption there – and the industrialized world could grow to rely on other parts of the world for as much as 30 percent of its natural gas supply.
 
There is a simple reason for that: while the world contains ample reserves of natural gas – 6,000 Tcf as of last year, and growing – they are unevenly distributed. The result is increasing international trade in natural gas across borders via pipeline – but because so much of the world’s natural gas is concentrated in remote locations, or “stranded,” trade in LNG will increase even faster than pipeline gas.
 
The overall picture can be summed up in a few words: The world’s energy consumers – and potential consumers –- want and need natural gas, and a global market in LNG must be developed to supply them. And that supply will come from non-OECD countries.
 
The Department of Energy has been promoting the growth of a global market in LNG since the First International LNG Summit we hosted in 2003 attracted hundreds of representatives from nearly two dozen producing and consuming nations, and from industry.
 
I addressed the benefits of LNG trade for the Americas – and the challenges we face in developing the market – at the Western Hemisphere Energy Ministers Meeting in Trinidad and Tobago last April.
 
Since those meetings, developments in the LNG market have all been in the direction of growth and development, and the Department of Energy’s views and activities on behalf of a global LNG market have only strengthened. LNG has rapidly grown to become an integral contributor to meeting U.S. energy demand – and the U.S. is on course to becoming the center of a global LNG market.
 
We are on course and moving fast. The numbers prove it.
 
In 2002, LNG imports to the U.S. totaled 229 Bcf, or 6 percent of imported gas. In 2003, imports totaled 506 Bcf, or 13 percent of all imported gas – more than doubling 2002’s total. Data for 2004 shows that LNG accounted for 15 percent of total imports, reaching 650 Bcf, almost a tripling in volume in just two years or an increase of close to 200 percent. The LNG numbers will increase yet again in 2005, and in the years beyond.
 
There is good reason for this rapid growth: domestic natural gas production has been flat, and imports by pipeline from Canada have been declining while U.S. exports to Mexico continue to rise, quadrupling from 100 Bcf in 2000 to nearly 400 Bcf in 2004. Fortunately, the supply-demand equation is at work and the current high price environment caused by tight supply has held natural gas demand relatively flat. U.S. natural gas prices today are at historic highs. Imagine where the market would be without the contribution of LNG.
 
Here are two dramatic illustrations of LNG’s importance to the U.S. national natural gas picture:

• Last year’s total LNG imports of more than 600 Bcf were the equivalent of almost 20 percent of our peak natural gas in storage, and
• As mentioned earlier, from 2002 to 2004, LNG imports increased by roughly 35 Bcf a month, or 400 Bcf, in round numbers. Without that added gas, we would not have hit the magic minimum of 3 Tcf of gas in storage entering the heating season now ending. The result would have been panic in the gas markets.

That is how important LNG is to meeting today’s requirement for reliable, affordable supplies of environmentally sound energy.
 
And its importance will only increase with the passage of time. According to Energy Information Administration forecasts, U.S. natural gas demand could easily exceed 31 Tcf a year by 2025, and LNG is forecast to account for fully 21 percent of that additional demand – about a ten-fold increase in LNG imports from 2004’s volume.
 
LNG’s growth in the U.S. is so rapid we’re having trouble keeping track of it. In 2003 the EIA forecast 13 Bcf a day of LNG would be needed to supply U.S. demand in 2025. Last year, the forecast rose to15 Bcf, and the latest energy outlook has raised the ante to 17 Bcf.
 
Today, four re-gasification terminals – in Massachusetts, Maryland, Georgia and Louisiana – serve the U.S. market. The terminals have a combined peak capacity of about 1.2 Tcf a year, and all four terminals have FERC-approved expansion plans that will bring their total capacity to more than 1.6 Tcf.
 
In addition to the currently operating LNG terminals, construction of the Freeport terminal on the Texas Gulf Coast is underway; the Energy Bridge project is scheduled to deliver its first LNG cargo to a subsea pipeline in the Gulf of Mexico next week; and groundbreaking for Chenier’s Sabine Pass LNG facility on the Louisiana Coast pass is expected later in the month.
 
There are, in addition, approximately 40 proposals on the drawing boards for new LNG plants in North America, with new ones being added at regular intervals.
 
The principal – perhaps the only – obstacle to the rapid growth of the LNG market is concern about the safety of LNG operations. On the consumption side, the Department of Energy and the Sandia National Laboratory recently released a comprehensive study of LNG tanker safety and security and risk mitigation strategies over water. The Sandia study for the first time gives public officials and planners the science-based tool they need to evaluate the safety and security issues surrounding the siting of an LNG gasification facility.
 
LNG operations have a long and excellent safety record, on both the production and the consumption side. But as the LNG incident at an Algerian gas liquefaction facility a little over a year ago demonstrated, we can never take too many safety precautions when dealing with an energy source. And we must remember that an entire industry can be lost due to a single incident.
 
LNG is safe: And we must educate our citizens about LNG’s safety, and the important economic benefit it delivers.
 
The Department of Energy stands ready to assist with this industry’s collective safety effort by making our technical expertise available to interested industry and government participants.
 
A large and efficient global LNG market is obviously important to the U.S. It is also important to the nations of the Caribbean and Central and South America. They have been presented with a unique opportunity to do three big things: 1) take advantage of a huge and growing U.S. market that can guarantee the financial viability of natural gas and LNG development projects in the Americas; 2) gain entry into the global LNG market, and 3) meet their own growing natural gas demand.
 
The potential benefits to the region in energy security, economic growth, improved standards of living, increased prosperity and closer trade relationships are large and obvious.
 
Let’s take a brief survey of the Americas to see just what their natural gas situation and LNG potential are. We’ve already discussed the U.S. need for increased natural gas and LNG imports.
 
Canada, on the other hand, should be natural gas self sufficient through 2025 and beyond, with two and a half Tcf left over for export to the U.S.
 
Mexico is a different story. Demand for natural gas there is expected to grow at a 4 percent annual rate for the next 20 years, while production grows by only 2 percent a year. Mexico intends to build new LNG facilities to help fill the gap. A half-dozen plants are under consideration there.
 
In Central and South America, demand for natural gas is expected to grow at a 4 percent annual rate, from 3.5 Tcf in 2001 to 8.5 Tcf in 2025. Venezuela has by far the largest natural gas reserves with nearly 150 Tcf , followed by Trinidad and Tobago, Argentina and Bolivia, each with more than 20 Tcf. Brazil and Peru have reserves of about 8 Tcf each.
 
Only Trinidad and Tobago, our long-time LNG trading partner, exports gas to other regions – exporting nearly 500 Bcf to the U.S. in 2004.
 
Central and South America are faced with the challenge of developing and producing their natural gas resources, and building all the infrastructure to process and transport gas from the wellhead to the burner tip. Energy is the platform on which modern societies and economies are built, and the speed of overall economic development in the Americas will hinge largely on the availability of their energy resources, particularly natural gas.
 
But large energy projects require large amounts of capital often unavailable to developing countries. The U.S. market for LNG will give the developing countries of the Americas the opportunity they need. While the United States will not be the only market for LNG in the world, it will be the largest, and the closest, accessible from the Pacific Ocean, the Gulf of Mexico and the Atlantic.
 
The U.S. market can provide the base load guarantees needed by governments and industry in the Americas to finance the development of natural gas and LNG infrastructure. “Stranded” gas can be put to use for economic benefit, and Central and South American countries without gas resources can themselves become LNG consumers at reasonable cost.
 
Nations in the Middle Eat and the Former Soviet Union, where most of the world’s stranded gas is located, see the potential in LNG. They are eager to get into what will soon become a highly competitive marketplace. Twelve countries – including Trinidad and Tobago – are active LNG exporters today, and another 10 have seen the wealth-creating potential of their natural gas reserves and lined up as entrants or potential entrants to the LNG market. Venezuela and Bolivia are among those potential entrants.
 
Fortunately for the Americas, in the LNG business, as in real estate, location is everything. The LNG producer located closest to the LNG consumer has an advantage over the competition. And the present and future LNG-exporting nations of the Americas are closest to the U.S. and will supply the gas for all of the Americas.
 
The U.S. expects its imports will anchor the region's markets. We are and intend to remain a more attractive customer for producers and marketers of natural gas than any other consumer of LNG in the world. We offer an established, reliable, continent-spanning free market in natural gas unlike that found anyplace else. Our natural gas market is well regulated and its activities are transparent.
 
Suppliers from South America, the Caribbean and elsewhere will find the American market to be both transparent and convenient.
 
The United States will be a valued customer and trading partner to producing countries and all the other participants in this huge global trading system of the near future. 
 
As I mentioned a moment ago, the investment necessary for LNG development will be truly immense, and it will require the creation of an attractive investment climate.
 
We estimate the capital requirements for a typical LNG development, from the producer’s reserve source to the consumer’s pipeline grid, to be $5 to $10 billion. To land 17 billion cubic feet of LNG at North American terminals every day in 2025, the LNG sector overall must attract investment well in excess of $100 billion. However, a gasification-only facility costs from $400 to $700 million depending on capacity.
 
Fortunately, there is a great deal of investor interest in LNG.
 
As always, capital will be available for enterprises that exhibit an acceptable degree of risk, and promise a reasonable rate of return. The key to the success of a growing trade in LNG and other energy resources in the Americas will be the creation of the conditions that promote investor confidence.
 
Those conditions include:

• Political stability
• The rule of law
• The sanctity of contracts
• Regulatory certainty, and
• Sound economic policies that foster enterprise and entrepreneurship such as more open markets, sustainable budget policies, and strong support for development.

Nations that meet these standards will attract the necessary investment and unleash the enterprise and creativity of their citizens for lasting growth and prosperity. Those nations that do not will be left behind.
 
The United States is eager to work with our neighbors to promote the formation of partnerships in an expanded energy trade network. We are continually working to initiate and improve energy cooperation and trade relationships bi-laterally and multilaterally through regional agreements.
 
The importance of trade and the bonds of cooperation, understanding and friendship forged by the pursuit of shared interests cannot be overestimated. Improved and expanded energy trade relations among the nations of the Americas will underpin and fuel economic growth and development.
 
The growing LNG market can help accomplish all of those things. This is a perfect example of a development opportunity where the pursuit of economic self-interest by all parties benefits all parties. Wise government leaders should recognize and capitalize on this opportunity, hitching their energy and natural gas development needs to the engine of U.S. LNG demand and realizing the benefits of rapid development.