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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

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America’s Unstoppable LNG Boom

LNG

Since Cheniere sent America’s first LNG cargo abroad in early 2016, U.S. gas exports have reached buyers in Latin America, Europe, Asia, and even the Middle East. The shale gas boom allowed the U.S. to send cargoes overseas, easing some of the domestic glut, with exports hitting a new monthly record in May.

Last month, 18 cargoes departed from Sabine Pass—so far the only LNG export facility in the U.S.—totaling approximately 61 Bcf, a new monthly record, the EIA said in its Natural Gas Weekly Update for the week ending May 31.

America’s LNG has reached the world fastest-growing LNG import market, Asia, and markets in the Middle East. In a few days, cargoes from Sabine Pass will call at Rotterdam for a first Northwest Europe destination, and to Poland—a first delivery to a country in Central and Eastern Europe, where Russia’s Gazprom reigns supreme.

Since February 2016, U.S. LNG cargoes were delivered to 20 countries, including to China, Japan, South Korea, and India. Middle Eastern buyers were Egypt, Jordan, Kuwait, and the UAE—not a negligible development given the fact that neighboring Qatar is the world’s largest LNG exporter. The ongoing diplomatic crisis between several Arab states—led by Saudi Arabia—and Qatar is currently not expected to directly impact Qatar’s LNG trade, although the UAE may have to buy LNG from suppliers other than Qatar, analysts reckon.

U.S. LNG supplies are broadening their global reach, with an LNG tanker out of Sabine Pass scheduled to call at Rotterdam on June 7. Also this month, Polish Oil & Gas Company (PGNiG) will welcome in the first half of June the first delivery of LNG from a U.S. supplier—Cheniere Energy—to Poland.

In the medium to longer term, U.S. LNG is expected to reach more markets and send more gas overseas, as four LNG export facilities currently under construction are expected to be completed by 2021. The United States is expected to become a net exporter of natural gas on an average annual basis by 2018, driven by declining pipeline imports, growing pipeline exports, and increasing LNG exports, the EIA said earlier this year. Combined, the four facilities under construction plus Sabine Pass are expected to have an operational export capacity of 9.2 billion cubic feet per day.

Sabine Pass also continues to expand, with trains 4 and 5 currently under construction.

As of May 1, 2017, the Federal Energy Regulatory Commission (FERC) has approved 7 export U.S. terminals that are currently under construction, plus another 4 approved not under construction yet. Related: The Unlikely Alliance Between Russia And Saudi Arabia

Just last week, the U.S. Department of Energy approved a long-term application to export LNG from the first offshore project, Delfin LNG, LLC. Exports in the amount of 1.8 billion cubic feet per day (Bcf/d) of natural gas are approved from Delfin’s proposed offshore Louisiana floating LNG terminal in the Gulf of Mexico.

The Delfin project would further position the United States to become the predominant LNG supplier to the rest of the world,” the Department of Energy said.

In terms of export destinations, the U.S. and China agreed last month that “Companies from China may proceed at any time to negotiate all types of contractual arrangement with U.S. LNG exporters, including long-term contracts, subject to the commercial considerations of the parties,” the U.S. Department of Commerce said.

Commenting on the deal, Massimo Di-Odoardo, Head of Global Gas and LNG research at Wood Mackenzie, said:

“The agreement connects the US, the fastest growing LNG supplier, with China, the largest LNG growth market.”

U.S. LNG sales in China accounted for 7 percent of China’s total LNG imports in March 2017, Di-Odoardo noted.

In the longer term, the deal paves the way for a second wave of investment in US LNG. Developers will now be able to target Chinese buyers directly, potentially supporting project financing. It could also support direct Chinese investment into liquefaction and upstream developments on US soil,” he said.

The agreement piles pressure on competing suppliers, including new LNG projects in Australia, East Africa, and Canada, as well as new pipe and LNG projects from Russia, WoodMac noted. In addition, the U.S.-China direct negotiation deal undermines the niche that Shell, BP, and Total have found in acting as the brokers between U.S. LNG exports and China’s imports, according to the energy consultancy.

With the upcoming additional capacity, U.S. LNG has the potential to upend global LNG trade flows.

By Tsvetana Paraskova for Oilprice.com

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Leave a comment
  • Dan on June 06 2017 said:
    With it's 24 hour ultimatum, can you imagine if the Saudis hit Qatar pipelines and Qatar hit Saudis oil port? How can Saudi claim Qatar is just the supporter of terrorism when Saudi and U.S. support terrorism. Is this a game of fools trying to pull a game of bigger fool on the world? The King has no clothes here, all around.
  • GregS on June 06 2017 said:
    The "unstoppable" LNG export boom also has the potential to drastically raise prices in the US, as their cheap gas is exported abroad for more profit. Don't believe me? It already happened in Australia, and it will probably happen here.
    If you're building a new house, I would definitely consider not using gas for heating.
  • Bob on June 06 2017 said:
    Invested in Cheniere Energy Partner LP (CQP) two years ago (an easy double), and couldn't be happier with performance, nor future outlook. Also enjoying the 5.28% yield.
  • Naomi on June 07 2017 said:
    USA has a giant continuous natural gas deposit along the Gulf coast from Mexico to Mississippi. US natural gas resource is greater than Qatar. Fracking also yields natural gas. The Atlantic coast deposits are yet to be defined.
  • Naomi on June 07 2017 said:
    Substitution of natural gas for crude oil is underway. The rate of LNG adoption may be rate limited by the available new ships that carry LNG. Only a half dozen shipyards can manufacture these giant special purpose vessels. These ships are expensive. Once purchased they are a sunk cost and operating expenses are relatively small.
  • luc on June 07 2017 said:
    At the same time, U.S. natural gas proved reserves have started to decline again.

    EIA: "Between year-end 2014 and year-end 2015, U.S. crude oil and lease condensate proved reserves decreased from 39.9 billion barrels to 35.2 billion barrels—a decrease of 4.7 billion barrels (11.8%). Over the same period, proved reserves of U.S. total natural gas decreased by 64.5 trillion cubic feet (Tcf) (16.6%), declining from 388.8 Tcf in 2014 to 324.3 Tcf."
  • Bill Simpson on June 08 2017 said:
    Anyone remember a couple of years ago, how many experts was saying that the US would experience a manufacturing renaissance because we would be able to undercut the cost of energy elsewhere else so much from the cheap gas, that people would be put to work in well paying manufacturing jobs, right here at home? Sorry. No big return in that.
    When the billionaires realized how much easy profit they could make by simply exporting the gas, that help the little people idea didn't last long, did it. These vast gas exports will kill any chance of a US manufacturing boom by both lowering the cost of energy in places with cheap labor, like China, while simultaneously raising the cost of electricity for the American middle class and all manufacturing.
    Think Trump, and the billionaires around him, care about that? ha, ha, ha... Yea right, just like they cared about the students of Trump University.
    They, along with the politicians in Washington, are looking out for the little guy. Sure they are.
    The only tiny benefit will be to the people working on the well drilling. And they are automating that process as fast as they can develop the technology to do it.

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