This U.S. Energy Export Will Gain Over 100%

I wrote earlier in the week about new rules for permitting of LNG export projects. And how this may make growth in U.S. LNG supply more difficult going forward.

But U.S. exports of another energy commodity are seeing a less-hindered boom.

That's natural gas liquids (NGLs).

Exports of NGLs like propane and butane have continued to run at high levels over the last few months. As the chart below from the Energy Information Administration shows, America shipped 308,000 barrels per day of propane in the week ended May 30. Up 45% from a year ago.

Exports have pulled back slightly in April and May. But news this week suggests that's a temporary lull.

The developments come from the key NGLs-consuming market of Japan. Where Tatsuhiko Yamasaki, chairman of the Japan LP Gas Association, told a news briefing that Japanese buyers are seeking a big increase in supply from America.

As reported by Platts, Yamasaki revealed that Japanese buyers have signed contacts to import up to 2 million tonnes of American NGLs per year by 2016.

That would be sizeable increase from current levels. Which saw U.S. sellers ship just over 950,000 tonnes into Japan during 2013. Implying that U.S. export volumes into this key market could double--soon.

This is an amazing turn of events, given that as recently as 2005 America was selling almost nothing to Japan in terms of NGLs. Demonstrating the phenomenal growth this industry is seeing--driven by the shale drilling revolution.

And it appears the trend could be good for a number of players in the NGLs business. Yamasaki told listeners that Japanese buyers need a price discount of around $100 per tonne of NGLs to justify U.S. imports--in terms of American prices as compared to benchmark prices in the Middle East.

The discount for U.S. product is currently running around $300 per tonne. Suggesting there's lots of room for shippers to increase their revenues without endangering the economics of this play.

This window could be very good for midstream companies with NGLs export exposure. And shipping companies that operate gas carrier vessels (day rates for very large gas carriers are running at a historically-high $57,000 as I write).

This story is just getting started.

Here's to international popularity,

By Dave Forest