Efforts to monetize abundant new U.S. natural gas supply—and at better than $2.50 a million Btu—are growing, including exporting the excess through new and existing liquefied natural gas (LNG) terminals.
Hydrocarbon-resource-challenged Japan pays more than $15 per MMBtu for LNG; Europe, more than $11.
Here’s an update on some North American LNG export plans and the prospects for fruition.
• Dominion Resources Inc., whose LNG import facility at Cove Point, Maryland, is mostly fallow, as are other U.S. LNG receiving terminals, has received U.S. Department of Energy (DOE) permission to export LNG from the plant to Free Trade Agreement countries, which include Australia, Morocco and other regions that don’t need gas or get it from other sources. It is now awaiting the more important permission, which is to export U.S. gas from its facility to any country with which the U.S. does not prohibit trade. It expects an answer by June. The initial plan is to export 7.8 million metric tons per annum (mmtpa) or the equivalent of 1 billion cubic feet (Bcf) a day.
• Cheniere Energy Partners LP has already received DOE approval to export natural gas from its Sabine Pass, Louisiana, receiving terminal to any country with which the U.S. does not prohibit trade. Plans are to begin building liquefaction capacity there this summer to export up to 2.2 Bcf a day (18 mmtpa). Blackstone Energy Partners LP et al. are investing $2 billion toward building the initial two of four trains, which will cost between $4.5- and $5 billion each. Cheniere has already secured contracts with buyers: BG Gulf Coast LNG LLC (5.5 mmtpa, Train 1), Gas Natural Fenosa (3.5 mmtpa, Train 2), Kogas (3.5 mmtpa, Train 3) and Gail (India) Ltd. (3.5 mmtpa, Train 4).
• Freeport LNG has received DOE approval to export to Free Trade Agreement countries and plans to liquefy and export up to 1.9 Bcf a day (13.2 mmtpa) from its receiving terminal near Freeport, Texas.
• Other Lower 48 projects that have been approved and are awaiting construction are Sempra Energy’s Cameron LNG (10.5 mmtpa or 1.4 Bcf a day from Hackberry, Louisiana), Gulf Coast LNG Export LLC (20 mmtpa or 2.7 Bcf a day from Brownsville, Texas) and two in Alaska (18 mmtpa or 2.4 Bcf a day, combined), according to Omar Nokta, analyst and managing director for Dahlman Rose & Co. Also proposed, but not yet approved, is an LNG terminal at Coos Bay, Oregon, which has sparked Sierra Club outrage.
• And, in Canada, gas producers Apache Corp., EOG Resources Inc. and Encana Corp. are building an export terminal at Kitimat (10 mmtpa or 1.4 Bcf a day) on the British Columbia coast.
Dave Pursell, an analyst and managing director for Tudor, Pickering, Holt & Co. Securities Inc., says, “The question is not ‘if’ but, rather, ‘when’ will North American LNG exports commence and what will be the pace and magnitude.”
Pursell says that at the recent IHS CERAWeek conference in Houston, “One energy CEO mused that, although he is a free-market guy and thinks LNG exports should/will occur, don’t be surprised if politics get involved. Would Washington rather export low-cost LNG or widgets manufactured because of low gas prices?
“...If tensions escalate into action between Iran and Israel—a big ‘if’—then natural gas will take front and center in the U.S. political discourse as a means to be less reliant on crude oil imports.”
Dominion’s Tom Farrell, chairman, president and chief executive officer, says interest in the Cove Point conversion project is great, as more gas is produced from the Marcellus shale in Appalachia and additional potential is being proven from the new Utica shale play in eastern Ohio.
“We are engaged in discussions with numerous potential customers in Europe and Asia, as well as producers in the Appalachian Basin,” Farrell says.
Meanwhile, ExxonMobil Corp. is an owner of the Golden Pass LNG facility at Sabine Pass, Texas, that receives shipments from Qatar. David Rosenthal, vice president, investor relations, says it is an import facility and “there are no current plans to change that, either, into any form of an export terminal…It will be interesting to see, as time goes on, if the viability of LNG exports materializes.”
For more commentary from Nissa, see the blog at http://blogs.oilandgasinvestor.com/nissa.
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