Power problems in Japan and a drought in Spain mean one thing: Liquefied natural gas (LNG) imports to the U.S. will remain "sluggish" at best for the rest of the year. That's the findings of a report by Waterborne Energy that forecasts U.S. LNG import volumes for the year will be about 420 billion cubic feet, down from the 770 Bcf that came into the nation in 2007. "We knew U.S. LNG imports would fall short of 2007 volumes when we saw delays in new production and demand rising in Europe and Asia," says Steve Johnson, president of Waterborne Energy Inc., a Houston-based consulting firm that keeps a close watch on the LNG industry. The demand in Europe is being driven by a drought in Spain, which has forced that nation's utilities to turn to using more gas for power generation. In Japan, a nuclear reactor that is key to its national grid, remains down after being damaged in an earthquake. The energy-dependent island nation always turns to paying more for LNG to fuel its power generation industry, going as high as $16/MMBtu in one instance. "When demand increases an supplies remain flat, the U.S. is the first to come up short," Johnson says. "The U.S. serves as the 'sump' for excess supplies of LNG and is the only country whose imports are largely driven by profit and not necessity." Simply put, he says, LNG shipments that were expected to come to the U.S. are "now being sold to the highest bidders in Asia and Europe." Some LNG industry observers had been hopeful that 2008 would be a great year for the U.S. Their expectations were based on 50 Bcf of new production that was expected to hit markets earlier this year. However, delays in LNG gasification projects in Norway, Qatar, Nigeria, Australia, Russia and Yemen have resulted in short supplies, Johnson says. There is some glimmer of hope on the horizon, though, for the LNG industry. Johnson says he feels there is a foundation for a recovery for U.S. imports in 2009, if new production of 72 Bcf per month comes online. "The more LNG that comes online prior to next sumer, the bigger the impact on U.S. import volumes," Johnson says. "We could see volumes in excess of 2007 levels of 770 Bcf." –John A. Sullivan, News Editor, Oil and Gas Investor, www.OilandGasInvestor.com, jsullivan@hartenergy.com