LNG Exports: A US-Based Analyst's View

Selling domestically produced natural gas as "solids" rather than as liquefied natural gas (LNG) may appear to offer a better return, but consider the size of the potential gain in global market share for manufactured products.

That is one of the key points articulated by Javier Diaz, senior energy analyst for LNG with Evergreen, Colo.-based BENTEK Energy, in his recent discussion with Rigzone.

For more of Diaz's insights, read on.

Rigzone: What are your initial impressions on how the market for U.S. LNG exports is shaping up? Do you see any one side – exploration and production (E&P) sector proponents of selling LNG to whomever wants to buy it, manufacturers who support limited exports to U.S. free trade agreement (FTA) partners only or public utilities who want to natural gas produced in the United States for domestic needs – having the edge at this point?

Diaz: At this point, I don’t have enough information about which (if any) of the three camps is having the edge or if and how they are able to influence the U.S. Department of Energy's decision about authorizing more exports to non-FTA countries. We have performed all our analysis assuming that market forces will dictate which projects will go forward, but also accounting for how the delays in this decision could affect the proposed projects in their viability and ability of securing buyers.

Rigzone: U.S. petrochemical manufacturers and others have argued that the United States can benefit more from the shale gas revolution by exporting “solids” (i.e., products made from natural gas) rather than just the LNG. What do you see as the merits (and perhaps drawbacks) of this position on the LNG export matter?

Diaz: Theoretically, you will have a better return exporting products made from natural gas than from exporting the raw material. However you have to look at the size of the markets, too. While the global market for U.S. LNG exports is there (and a proof for this is the amount of memoranda of understanding the U.S. projects have been able to secure already, totaling 11.6 billion cubic feet per day), I’m not sure about how much market share you can gain for “solid” goods by keeping the gas in the U.S. and exporting the new products, or if keeping the gas in the U.S. so Henry Hub (HH) prices don’t increase will help the competitiveness of the industry generating as much economic benefit as LNG exports.


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