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First U.S. LNG Shipment Departs…for Brazil

A new era for U.S. energy has begun. The first shipment of LNG has officially left American shores, a highly anticipated event that has been years in the making.

It wasn’t too long ago that the U.S. thought it would need to dramatically increase LNG imports because of flagging domestic natural gas production. But the shale gas revolution that began about a decade ago upended all of those predictions.

Cheniere Energy was first out of the gates to build a new export terminal, putting the finishing touches on the facility only recently. Cheniere announced on February 24 that the first cargo from its Sabine Pass export terminal on the U.S. Gulf Coast in Louisiana was loaded up and would depart immediately. Related: Is This The Best Moment To Get Into Oil?

“Today we will finish loading the first commissioning cargo of LNG from our Sabine Pass LNG terminal. This historic event opens a new chapter for the country in energy trade and is a significant milestone for Cheniere as we prepare Train 1 for commercial operations," Neal Shear, Chairman of the Board and Interim Chief Executive Officer of Cheniere Partners, said in a statement.

There has been a lot talk about the U.S. sending LNG to Asia in order to take advantage of high spot prices. There was also quite a bit of hype surrounding the prospect of U.S. LNG bolstering European energy security as the EU tried to break its dependence on Russian pipeline gas. Related: Who Will Be Left Standing At The End Of The Oil War

In a twist, however, the closely-watched first shipment of LNG departed for Brazil. It is unclear what price Cheniere Energy is fetching for LNG shipment, but according to the U.S. Federal Energy Regulatory Commission (FERC), landing prices in Brazil at the end of 2015 were above $7 per million Btu (MMBtu), which compares favorably to the U.S. spot price of about $2/MMBtu.

There are other companies with plans to build LNG export terminals, but the market could be entering an extended period of depressed prices as supply rises and demand stagnates. The latest spot prices in Asia, which is the most prized market for LNG, have dropped below $6/MMBtu. "We don't think the world needs new liquefaction capacity until the end of 2023 or 2024," Bob Ineson, an analyst with IHS Energy, said recently. "Or even longer than that. So, it's a challenge for everyone right now."

By Charles Kennedy of Oilprice.com

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