America: On the Verge of Exporting LNG

In the past decade, drillers have unlocked so much unconventional play, that America is enjoying record gas supplies and prices that are just a quarter of what Eastern countries pay. It is estimated that the annual U.S. gas supply could grow a further 25 percent by 2035, according to the U.S. Energy Information Administration (EIA).

This phenomenon is being noticed globally and many are asking if America should begin to export liquefied natural gas (LNG) to lead the nation's return to economic health and restore its status as a global energy leader.

"A superpower does not punch below its weight class and stay a superpower forever," Dominion Chairman, President and Chief Executive Officer Thomas F. Farrell II said in a press release at the at the U.S. Chamber of Commerce's Institute for 21st Century Energy in Washington, D.C. "We owe it to the American public – and to future Americans – to act like the global leader we are and seize the energy opportunities before us … Exports will create incentives for American companies to drill for more natural gas, create more economic growth, more jobs and more government revenues – while at the same time, boosting international stability, supporting our country's geopolitical interests and reducing our trade deficits."

Dominion announced it is moving forward with its LNG export project at its Cove Point terminal on the Chesapeake Bay in Lusby, Md. The $3.4-3.8 billion project is slated for   construction in 2014 with an in-service date of 2017. Cove Point, with access to the Marcellus and Utica Shale production areas, has signed 20-year terminal service agreements to Pacific Summit Energy, LLC, a U.S. affiliate of Japanese trading company Sumitomo Corporation, and GAIL Global (USA) LNG LLC, a U.S. affiliate of GAIL (India) Ltd.

Another company that is leading the pack in LNG exportation is Houston-based Cheniere Energy Inc. The company has been revamping its Sabine Pass liquefied natural gas port in coastal Louisiana. Built in 2008 before the shale boom, the company originally focused on making the refinery into an import facility. Five of the storage tanks that were built have the ability to hold 17 billion cubic feet (Bcf) of natural gas. Now, the company is making the refinery into an export facility with hopes to begin shipping 500 million cubic feet of gas a day by 2016.

The $12 billion investment should be able to export about 4 percent of America's current natural gas output. Sabine Pass Liquefaction is the first U.S. LNG export facility that has entered the construction phase and is currently developing five liquefaction trains adjacent to the existing receiving terminal.

Currently, there are 11 existing LNG import/export terminals, according to the Federal Energy Regulation Commission (FERC) with more proposed projects in the works. It appears that several projects that are close to near-completion will have combined in-service capacity exceeding 6 billion cubic feet per day (Bcf/d) by the end of 2018.

This mass amount is necessary considering that global LNG demand is expected to grow 39 percent (12.9 Bcf/d) over the next five years, faster than the projected 27 percent (8.5 Bcf/d) global gas supply growth, according to BENTEK's market report "LNG Exports: The Global Thirst for North American Shale Gas".  

"It took 20 years to reach the point of a breakthrough on shale gas – which really occurred in 2003 – and it wasn't until 2008 that it started to become clear that this was not something on the fringes, but something that would have major consequences not only for the North American gas market but for the global gas market," said Daniel Yergin, vice chairman of IHS, at his keynote address at the LNG 17 conference.

LNG 17, which Houston hosted at the George R. Brown Convention Center, welcomed 16,000 decision makers from 80 countries, discussing the latest global trends, challenges and opportunities facing LNG today.


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