United States Continues Move Toward LNG Increased Exports

Posted on June 05, 2014
Posted By: Randy Burns
 

Last fall I wrote an article regarding liquefied natural gas (LNG) and its impact on the U.S. energy picture. Although no new significant developments have transpired since the article was written, LNG continues to dominate news headlines because its potential to impact natural gas prices is profound.

Despite being the world's largest natural gas producer, the US is not the world's top exporter; that title belongs to Russia, who is the second largest producer. This is a result of U.S. law requiring export terminals to receive licenses to sell gas to countries that don't currently have a signed free trade agreement (FTA) with the US, which includes all European nations, China, India, and Japan.

Since May 2011, 31 terminals have applied for permission to export, but only six have conditional approval. The majority of the approved export locations are in the Gulf of Mexico, one on the east coast, and the other in Oregon.

Russia's invasion of Crimea has presented an opportunity to give the US leverage in the region and has put pressure on the Obama administration to accelerate approvals for export facilities. In late March, President Obama signed off on a license to export LNG to countries that don't have an FTA with the US to Jordan Cove LNG Terminal, located in Coos Bay, Oregon. This is the sixth project to earn such a license, which is in high demand, but it would be the first terminal located on the West Coast to get a license. In addition, in May, Reuters covered a story about U.S. Senate Democrats pressing the President for speedier LNG export permits.

Because of high natural gas prices in Asia, Jordan Cove has a competitive advantage in supplying Asian countries with U.S.-produced natural gas. The price disparity between the locations is vast with prices in Asia reaching as high as $14/MMBtu.

If all six facilities start exporting natural gas, the amount of exports would total 9.3 Bcf /day - over 10% of current U.S. production. It's unlikely that the remaining 25 sites will all receive approval, and the market is responding accordingly. The longer-dated natural gas contracts have remained relatively stable, all trading between $4 and $4.30/MMBtu this year. LNG presents a great opportunity for the US, but its impact on future prices is still uncertain.
 

 
 
Authored By:
Randy Burns graduated from Pennsylvania State University with degrees in Finance and Economics. After graduation, he launched his career at Griffon Energy Capital, LLC, a hedge fund located in Austin, Texas, where he worked as a trading assistant on the Natural Gas and Power Desks. Randy moved back to his hometown of Pittsburgh in January 2009 to work as a consultant for Co-eXprise, a firm focused on procurement solutions. He
 

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Comments

June, 05 2014

Ferdinand E. Banks says

Let me say that natural gas presents a wonderful opportunity for the U.S. if it actually exists to the extent advertised, and as long as it is not exported. People talk about America's energy advantage, but that advantage can be realized over the distant future only if the silly idea about exporting more oil and natural gas is dropped.

Besides, how much natural gas does the US possess. If the depreciation/depletion of natural gas wells is what some people claim. then the gas now being obtained by fracking is merely a bubble. And this is the way that I choose to regard it, because the failure to resort to intensive fracking in European countries with an advanced technology - like France - tells me that something is wrong somewhere in the claims about the so-called natural gas revolution in the US.

Selling greater amounts of oil and gas to foreigners at the present time makes no economic sense at all for the US, as compared to the few hundred or thousand or hundred thousand who will gain.

June, 06 2014

Malcolm Rawlingson says

I am coming around to that view Fred. The real economic advantage is gained by keeping the gas on US soil and using it to produce cheaper goods and employ US citizens. Exporting it so that competitors can use it to produce goods more cheaply seems to be economic suicide to me.

Malcolm

June, 07 2014

Ferdinand E. Banks says

One of the problems here is the definition of ECONOMIC ADVANTAGE or ECONOMIC EDGE. The ignoramuses Writing in the journal Foreign Affairs recently need some tutoring here. You have that advantage or edge if the gas is available as long as it is needed, which is until you are provided with as much Generation 4 nuclear Equipment as the country needs. As for exporting it to competitors, I really wonder if American voters are going to buy that craziness.

June, 07 2014

Malcolm Rawlingson says

I think the USA will get all the nuclear power it needs because there is no other viable choice. It would appear however that the companies building them will not be US based. I suspect Hitachi and South Korea (who are building the 4 PWR's in the United Arab Emirates) will be the winners here. Very sad that a technology developed in the USA can only be built competitively by foreign constructors. But exporting natural gas - well I hope there is enough of it to supply Europe and the US. If it runs out the US will have squandered a once in a lifetime opportunity....a bit like they squandered PWR technology. MAlcolm

June, 07 2014

Ferdinand E. Banks says

Malcolm, when you have a Culture in which lies and misunderstandings are becoming a way of Life, anything is possible. First George W. Bush and then Barack Obama. I've Always thought that I could read the signs, but now I know that I was right on the money. I was crazy about my job in Chicago, but something told me that someday the wrong people would be giving the orders in Washington. Of course, Canada might have been better than Sweden, but even so...

June, 08 2014

Malcolm Rawlingson says

Unfortunately Fred we have a culture of deliberate misinformation across the world. It is done for the same reasons as smoke screens are generated....to conceal what is really going on so that the public does not know. The media are the main perpetrators of this and I believe it has a major effect on the peoples of the world. It contributes to the doom and gloom mentality I observe to be very prevalent today. What else explains the litany of garbage programming pumped out by these organisations or the nonsense passed off as "news" when most of the "facts" are created by the scriptwriters for the media talking heads. I see it often in the reporting of stories on the nuclear industry. It is so woefully inaccurate that I then have to call into question the reporting on other industries. So when you do your own research you find this "news" to be mostly wrong and designed to promote a particular view point. As a result I have stopped watching all the Canadian (CBC, CTV) and American (FOX, CNN) news outlets. They no longer report news just spin for their own political or financial gain. About the only news organisation of any value to me is the BBC in the UK. It reports mostly the facts and lets the reader/viewer draw their own conclusions but I wonder how long they will be able to last. About natural gas wells and shale gas - I suspect that you are correct in that there is much hype and not much profit in these enterprises which makes one wonder how long this will in fact last.

Perhaps it is all another big smoke screen to disguise something else.

Malcolm

June, 09 2014

Ferdinand E. Banks says

Yes, that's t the Point Malcolm: having the ability to disguise lies as fact. Returning to our great presidents, George W. didn't know the difference between lies and facts, and hardly cared. As for Mr O, he's in the same situation. He just wants to make a good impression. He should be in show business, and might be some day,

But of course, the guilty oarties are the voters - Selling their Children and grand-Children out for a few hours of lousy TV, or maybe just for the Hell of it.

June, 10 2014

Fred Linn says

Exporting natural gas will only drive prices up that people pay for energy here. And enrich a few at the expense of many.

Trying to say otherwise is just manipulation in an attempt to get rich quick on the backs of others.

It used to be called lying, but now we are told it is PR and "education".

Hot tar and feathers used to be considered very educational at one time as well----maybe it is time to revive some of the older methods of education.

June, 11 2014

Ferdinand E. Banks says

Fred, many of the "few" you cited are already rich, but they wouldn't be satisfied no matter how much Money they have.

Somewhere in the distant past, the American voters gave the president the right to restrict energy exports, and they should make sure that the next president takes care of business - by which I do NOT mean show business. And when he goes, let's hope that he take his ignorant energy minister with him.

June, 11 2014

Fred Linn says

Fred, did you see in the news that Warren Buffett has directed his company, Berkshire Hathaway to double its investments in renewable energy from $15 Billion to $30 Billion?

I would interpret that to mean that he thinks there is significant opportunities to make money in renewable energy.

June, 11 2014

Ferdinand E. Banks says

I wouldn't give it that interpretation, but if he wants to show his friends that he too is a Money waster then more Power to him.

June, 16 2014

Richard Vesel says

Fred and Malcom,

I also agree - selling large amounts via export in the short term shows no consideration of the future, except for who will be the richest when the "future" arrives. Sadly, naked capitalism doesn't promote wise decisions, just ones that are expedient for the rapid exploitation of available opportunities.

I would like to see us "export" to Hawaii, where they need to get off their addiction to fuel oil for 24/7 power production. Not that they would be a big consumer, but it would certainly help THEIR economy, and lower one significant aspect of the cost of living for 1.4M people. They are working on quite a bit of renewables there (I recently visited two wind farms on Maui and the Big Island), but gas turbines need to be in place to provide both base load, and renewable swing coverage.

Finally, domestic needs must take priority, to insure solid supply available in areas currently underserved by pipelines, and to prevent large price spikes due to temporary tightness in supply. These would serve the true "owners" of these domestic resources - the citizens of the US.

RWV

June, 16 2014

Richard Vesel says

What is sad is that our Constitution DIRECTLY prohibits the levying of any federak taxes on exports, which could then be fed back into the country for the benefit of debt reduction, resource management, environmental protection, etc. etc. So the rich get richer not only at our (future) expense, but without contributing a dime towards the maintenance of the system that lets them get richer in the first place.

What a horrible setup for the 99%

Malcolm, I do like the BBC UK as well. Amazingly unbiased reporting, and a product of a socialist enterprise, too ;-)

RWV

June, 17 2014

Ferdinand E. Banks says

I Think Richard that I am going to be forced to get in touch with the US Energy Secretary and ask him to abdicate. No, I dont Believe that Malcolm or I should replace him. but you should at least be a candidate. Or maybe we could convince Vladimir Putin to take that job, assuming that he stops spicing his punsch with vodka or rotgut.

The issue with the future is exactly what you say that it is: the future is being devalued in order to make the rich richer. The ignorant Energy Secretary, and the boobs at the International Energy Agency just don't seem to be capable of Learning anything. You don't export your energy advantage if you have any...you don't even Think about it or talk about it, although you might listen to fools talking about it in case Alcatraz will be opened some day, and there is a shortage of occupants.

I Think though...I Think that American voters get the message here. Yes, it is hard to Believe, but I Think that they get the message this time.

June, 18 2014

Ferdinand E. Banks says

Well, this has been a nice round. I just wish that some of the precious few who Think that exporting an energy advantage makes sense had taken a more Active part.

Incidentally, the basic problem here is that somebody has listened to the wrong economics teachers, In Sweden of course the energy advantage - electricity generated by nuclear and hydro - was partially exported, but the economics teachers here who deal in matters like this are disappointed that they didn't export all of it.

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