LNG Exports: A View from the Other Side of the Atlantic
Rigzone Looks Back: At this writing, the U.S. Federal Energy Regulatory Commission has authorized construction of four LNG export projects. The latest liquefaction terminal to clear this regulatory milestone is Dominion Resources' Cove Point project on Chesapeake Bay in Maryland. A likely destination for much of the LNG from Cove Point and export projects on the Gulf Coast will be Europe. This article presented insights from U.K.-based analyst Mark Young, who observed "the United States has a lot of gas and a lot of choice what to do with it."
LNG exports from the United States would advance energy security for importing countries, observed Mark Young, energy analyst with London-based Evaluate Energy. In turn, the United States enjoys a key advantage as an up-and-coming large-scale LNG exporter because it is on the leading edge of economically producing natural gas from shale formations, he added.
Check out the following exchange for more of Young's insights.
Rigzone: What effects do you see LNG sourced from the U.S. Gulf Coast and East Coast having on Europe, not to mention Europe’s major gas suppliers?
Young: The major gas suppliers have already seen the United States disappear as a potential export market, and in looking to export gas themselves, those suppliers now have to consider the United States as competition. This is a major turnaround in around 4-5 years, as these are countries we are talking about. Budgets will have been set, spending plans put in place, and income sources established for years to come, but the United States has potentially sent most of these plans into a degree of uncertainty. Of course existing sales/purchase contracts will still be fulfilled, but spot sales (Qatar seems to pick up a lot of these) will begin to have more competition, as will plans to fill capacities created by expansion plans at European terminals/new terminals being built. The most likely conclusion here is more competitive pricing.
In terms of the countries who would be receiving the LNG, it gives a greater scope for energy security as well as these more competitive prices. Poland for example is a few years down the line from widescale shale gas production, and is currently building an LNG receiving terminal to give them greater security against the monopoly of supply Russia currently holds. A lot of European countries, not only Poland, are suffering from a lack of bargaining leverage to use in their favor in negotiations with Gazprom. The U.K. is even further away from production and anything that could impact gas prices in a positive way for consumers will no doubt be gladly received.
Rigzone: The United States is on the leading edge of developing its vast shale gas reserves, but it is not the only country with such a resource endowment. Poland, the U.K. and China are some other countries that come to mind. Do you believe the United States risks missing a golden opportunity in terms of LNG exports? Why or why not?
Young: I do believe they risk missing a golden opportunity. Whilst there are indeed other countries with great gas resources, they currently have no guarantee the resources are economically viable to produce, and mostly these countries have their own domestic issues to deal with first. The United States has already gone through this process, and although new problems are now arising from new parties on the eve of a potential LNG export movement from the United States, the one thing that is certain is that the United States has a lot of gas and a lot of choice what to do with it. Securing contracts to export now, as the terminals are being built, not while they are operational but idle in a few years’ time with nowhere to send gas, is surely vital to the industry succeeding in the United States.
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