World Gas Intelligence
Imagine US LNG Exports

Wednesday, September 15, 2010

The US Department of Energy (DOE) decision last week to allow Cheniere to export up to 803 billion cubic feet (16 million tons) per year of gas for 30 years from its Sabine Pass site in Louisiana could be a first step in revolutionizing North America's still largely isolated gas industry -- and a big step toward higher North American gas prices and perhaps even global gas price linkage.

The DOE authorization effectively covers two of the four 3.5 million ton/yr liquefaction trains Cheniere has said it hopes to build at Sabine Pass, already home to a 4 Bcf/d (32 million ton/yr) regas terminal, with existing rights to re-export LNG from other countries. Top US shale gas producer Chesapeake has tentatively committed to take one train of liquefaction capacity, enough to prepare 500 million cubic feet per of its domestic US gas for export (WGI Jun.9,p5).

"We believe the US has needed an export terminal since the beginning of 2007," says Bentek Energy analyst Kelly Bennett. "We don't see demand growing enough to absorb the significant amount of production expected to go online, and to raise prices to a level high enough that producers would want to keep going." Bentek forecasts US production growth of another 5 Bcf/d by 2015. "Having a true export terminal in the Gulf of Mexico could really influence the Henry Hub price," Bennett adds.

In the initial DOE ruling, Cheniere was authorized to export only to countries with free trade agreements with the US. While clearly restrictive, even this limited clearance could allow significant exports, particularly as the list of qualified countries includes Singapore and Canada -- which both have LNG hub ambitions that would allow re-export to other Asian and European locations -- as well as others including Australia, Chile, Mexico, Oman and Peru (WGI Aug.27'08,p8). Cheniere is now seeking authorization to export gas to all countries except those few subject to a US trade ban. That clearance would also cover volumes from another two trains.

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