Last week US company Cheniere Energy announced plans to build an LNG export terminal at Sabine Pass, on the Texas-Louisiana border. The company already operates an LNG import terminal there. It’s still early days; the company is talking to potential customers about contracts, but says it could be liquifying and exporting LNG by 2015.
So why the about-turn? Shale gas, naturally, is the obvious reason; US gas production has risen dramatically thanks to the Marcellus and Haynesville plays.
But does this mean a new era for US natural gas? Does net exporter status beckon? It’s not quite as clear-cut as that, yet.
Cheniere’s plan is to offer a ‘bi-directional’ facility, providing both import and export and allowing it to store and take advantage of arbitrage opportunities. From the company’s statement:
“Due to the depth of the markets in South Louisiana with an abundance of supply and existing pipeline infrastructure, we can provide an additional outlet for U.S. natural gas production while offering a low cost source of supply for global buyers seeking alternatives to oil-indexed contracts,” said Charif Souki, Chairman and CEO. “The ability to buy or sell natural gas in one of the world’s most liquid natural gas markets provides industry players with a very powerful tool to manage their portfolios.”
And despite the surge in domestic production, US demand for LNG imports hasn’t vanished overnight.
As this Barclays Capital chart shows, the US ‘take’ of LNG has continued to rise for more than a year, only to reverse the trend in April 2010:
And this is despite the gas glut in the US being well under way, with storage levels high for much of the past 18 months:
Cheniere’s is not the only plan; there is another (pdf) under way for a liquefaction plant in British Columbia, and the US already has an export terminal in Alaska dating back to 1969, which exports to Japan.
However, for now at least, there are still more plans for new regasification/import LNG facilities than there are for export LNG terminals in north America.
But if that trend does reverse (new import facilities have been put on hold) it would raise the interesting prospect of the US shale gas boom more directly affecting prices — and geopolitics — in other parts of the world, such as Europe. The likelihood of this, and particularly what it might mean for Russia, is already spurring a lot of chatter in the diplomatic world.
(H/T to the ever-watchful No Hot Air on the Cheniere announcement.)
Related links:
