Challenges in Getting LNG to Markets & the Need of Social License

This article is 3rd of 4 looking at LNG in a national and global perspective. We look at the challenges in getting LNG to markets and the need for social license.
Challenges in Getting LNG to Markets & the Need of Social License - Articles

Updated: August 8, 2017

Challenges in Getting LNG to Markets & the Need of Social License

The biggest challenges of getting LNG to markets span from the pace of awarding export licenses, to the rising level of activism in communities where new export facilities are planned and social license is lacking. Also on the list would be competition from emerging shale energy countries and the lack of a transparent global natural gas market and the liquidity needed to make it as robust as what we have here in North America. But all of those items are resolving to some degree and will go through the slow evolution that can be expected due to their complexity.

There is also an uncertainty around where the world economy is presently headed, specifically with China and Europe. With China as the world's largest importer of energy and one of the biggest economies, it's economic direction could have a significant impact on price, as new LNG supplies enter the global market, leading to a near term glut and downward trend in price. In October 2015, China significantly lowered the cost of LNG internally, which should encourage more domestic use, and create a price advantage for that commodity in their market. Longer term, there is an expanding expectation that demand will increase with more concern with climate and a greater shift to gas from coal for power generation.

It's been said that governments give permits for developing resources and building infrastructure but communities give "social license" to companies to operate near them. More and more, we are seeing the truth to this. Without some level of "permission" from communities (here, the process of shale gas being extracted and then transported to market, along with the infrastructure to process, utilize, and/or export LNG), the process will often come to a halt.

One of the biggest issues we have seen is a general lack of understanding of the energy system we are all closely linked to daily. Just as most consumers don't understand the nuance of how their food is continually made available, many don't have a clear appreciation for the current energy paradigm they are tied to. That partial understanding can make people susceptible to voices that advocate a change to a new energy equation, much different than what we currently have in place, and at a pace that is unrealistic economically, technically, and socially. Easier connections between new networks of people through social media, has both stymied clearer understanding of the key issues, through the spread of misinformation of all types, in an increasingly polarized conversation on energy, and at the same time, created new interest in future solutions. Without a doubt, social media has changed the rules on engaging stakeholders and allowing a more "distant" ownership of "local" energy issues. People from other regions, and even other countries, are weighing in on local infrastructure development, often with great influence, and sometimes for reasons vastly different than those based in local communities.

Changing a major component of our economy as large as energy, with large workforce and economic implications, will likely take decades of time, and considerable political maneuvering on U.S. energy policy. It will also take an ongoing educational effort, so that stakeholders in the dialogue can plan a smoother transition as it impacts their families and communities.

(Next week will contemplate government's role going forward in looking at natural gas development and climate change.)

Tom Murphy is Director of Penn State's Marcellus Center of Outreach and Research (MCOR). With 29 years of experience working with public officials, researchers, industry, government agencies, and landowners during his tenure with the Outreach branch of the University.

His work has centered on educational consultation in natural resource development, with an emphasis specifically in natural gas exploration and related topics. He lectures globally on natural gas development from shale, the economics driving the process, and its broad impacts including landowner and surface issues, environmental aspects, evolving drilling technologies, critical infrastructure, workforce assessment and training, local business expansion, resource utilization, financial considerations, and LNG export trends.

In his role with MCOR, Tom provides leadership to a range of Penn State's related Marcellus research activities and events. Mr. Murphy is a graduate of Penn State.