World Gas Intelligence
Political Pressure Could Slow U.S. LNG Export Approvals

Wednesday, April 25, 2012

Now Cheniere's Sabine Pass LNG export project in Louisiana has received final US government clearance, leaving financing as the only hurdle to starting construction, the big question is how other proposed export schemes will fare as the regulatory process comes under greater scrutiny (WGI Apr.18'12). Including Cheniere, 10 export projects have been proposed with a combined capacity of 14 billion cubic feet per day, or 107 million tons per year of LNG. In light of the massive volumes under consideration, sources say the US Department of Energy (DOE) could be feeling the pressure from legislators and manufacturers concerned that exports would yank domestic natural gas prices off their current lows of around $2 per million Btu and hit industries that use natural gas as fuel.

Of the other nine projects, Freeport LNG in Texas is furthest ahead, with plans to submit a formal request to Ferc to issue an environmental impact statement, and construction and operating authorization in August. Macquarie Energy recently backed out of Freeport project marketing, although it remains committed to financing, but Bentek Energy analyst Chris Micsak believes Freeport will remain viable if it can "put together a good group of partners." Another project that could pull ahead is Dominion's Cove Point in Maryland. "With production growing in the Northeast, Cove Point presents a potential opportunity for excess gas in that region to find a market," Micsak says.

Sabine Pass, meanwhile, is expected to go ahead, even if the DOE decision is appealed. "They have secured more than enough financing and all the necessary permits to go ahead with Phase 1. And since Cheniere has signed up strong counterparties for take-or-pay agreements, they have essentially guaranteed revenues against which they can raise financing," Micsak says, adding that Bentek expects a final investment decision in the next two or three months.

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