US Natural Gas Exports Picking Up Momentum

Nerves less rattled over Syria, reflected in falling oil prices; the swelling LNG export momentum in the US-but is a pause in the works?; and this week's astonishing issue of Oil & Energy Insider ….

Washington has backed down over a strike on Syria-for now-and oil prices have responded with crude oil for October delivery falling $1.01 to close on Monday this week at $109.52 a barrel in New York. Wholesale gas prices also fell 5 cents to $2.80 per gallon, and heating oil declined 5 cents to $3.12 per gallon, while natural gas rose 8 cents to $3.61 per 1,000 cubic feet.

On Monday, despite the wildly varying statements from White House officials, it became clear that the Obama administration is eyeing a "diplomatic" solution in the form of a proposal from Russia to hand the UN control over Assad's chemical weapons. (You can read more about the nuances of this in this week's Oil & Energy Insider.)

Now that we have a reprieve from Syria for the time being, we can focus on US natural gas exports, which have clearly picked up momentum in recent months.

This week, the Obama administration approved the fourth liquefied natural gas project, giving the conditional green light to Dominion Resources for LNG exports from Maryland's Western Shore. Dominion plans some $3.8 billion to revamp its Cove Point natural gas import facility into an export terminal, and has already signed 20-year contracts with importers in Japan and India for natural gas shipments. The contracts went to Japan's Sumitomo Corp. and India's GAIL Ltd.

Dominion is eyeing next year for the start of construction and plans to have its first LNG ready for export in 2017. The company will be allowed to export 0.77 billion cubic feet of natural gas per day from the new facility.

The Department of Energy (DOE) has between over 25 applications to export LNG-some of them seeking to export at least 30 billion cubic feet a day, for which they will fetch much higher prices than at home. The US produces about 70 billion cubic feet a day of natural gas. So the competition will be stiff for these approvals.

Right now, the approval time is about a month, so at this rate we can expect perhaps three more green lights for LNG exports by the end of this year.

Critics abound: Half saying the administration is moving too slow with its approvals; half saying it's moving too fast and reaching a threshold that could cause a natural gas price spike at home and hit manufacturer and thus consumers hard.

There is talk that the criticism could make way for a delay, and time to re-think, according to a Reuters report, citing a note from ClearView Energy Partners. ClearView said the DOE may pause its review process around year-end to consider new information provided in the Energy Information Administration's preliminary annual energy outlook for 2014, which is expected in December.

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That's it from us this week.

James Stafford
Editor, Oilprice.com