US Sees Gold with LNG. But do Manufacturers and Chemical Makers?
Who said the energy industry doesnâ€™t turn on a dime: Witness how the United States has gone from being an energy-dependent natural gas importer to what is likely to become to a net exporter as early as this year. But how will this affect prices that US manufacturers are paying as well as the domestic economy?
Overall, the development of shale gas and the ability to super-cool it before shipping it out in the form of liquefied natural gas, or LNG, is positive. Thatâ€™s because the US now pays considerably less for the commodity than does Asia or Europe, which means those potential sales would boost the bottom lines of American oil and gas developers that are in desperate need of some good news.
And while many on the green side would disagree, it may also benefit the global environment — if that natural gas would displace foreign coal use. For those reasons — economy and environment — the US Department of Energy has given approval for some companies to convert their LNG import facilities to those that can now export the fuel.
First up: Cheniere Energy, at its Sabine Pass project located on the border of Louisiana and Texas. While it has been delayed by a few months, it will start exporting LNG in phases beginning later this year. After that, Freeport McMoran Energy, which got approval nearly three years ago to export LNG.
To this end, Barclayâ€™s Commodities Research says that six LNG export facilities should be operational by 2020, according to a research report in which the publisher Platts profiled. Beyond Cheniere and Freeportâ€™s projects, the others include Lake Charles Exports, Cameron LNG, Dominion Cove Point and Southern Cos. Elba Island. When they are all up-and-running, the US will be the worldâ€™s second largest natural gas exporter behind Qatar.
“In a shift of tectonic magnitude, the US is firmly on track to become a net exporter of natural gas, with far-reaching implications for the US economy, geopolitics, natural gas markets and the global LNG space,” the report said, as noted by Platts.
“Ultimately, LNG exports will likely have the greatest effect on the natural gas markets, both in the US and globally,” it continues. “This would bring geopolitical and price diversification to the global LNG markets and re-draw regional LNG shipping trends, sending tankers sailing on longer trade routes.”
The Energy Department found in December 2012 that prices could rise as much as $1.11 over five years. But it still concluded that the overall benefits to the U.S. economy would outweigh that potential price increase. The losers, it adds, would be the chemical makers like Dow Chemical while the winners would be the domestic natural gas producers such as Chesapeake Energy and ExxonMobil.
Economically speaking, the United States, for now, has a huge lead over the would-be exporting countries. The global consultancy Deloitte Touche Tohmatsu Limited profiles four nations that also have the potential to drill for and to sell shale gas to needy countries: Argentina, China and Poland. The only one of those that is having luck out of the gate is Argentina, which is trying to scale up its production efforts.
â€śThe United States has an abundance of natural gas and liquefied natural gas (LNG) exports will benefit the entire U.S. economy,â€ť said Stephen Payne, Chairman of United LNG, in earlier comments. â€śReports show that exporting natural gas should grow the U.S. economy by nearly $50 billion over the next seven years.â€ť
And the environment? The greenies are concerned that the global demand for cheap US natural gas will encourage more fracking, which is the drilling method used to reach the shale gas embedded in rocks a mile beneath the earthâ€™s surface. As such, they worry about increasing carbon emissions as well as the fouling of local water supplies.
But Energy Secretary Ernest Moniz has said that he views the production of shale gas as a way to minimize coalâ€™s imprint. If such gas is shipped overseas, it would not only increase this countryâ€™s overall economic output but it would also help others reduce their carbon footprints.
On the heels of the Great Recession, neither the Republicans nor Democrats want to impede the natural gas boom that has taken place here. And while the oversight must be carefully considered, both parties generally feel that increasing natural gas supplies will suppress prices and diminish coalâ€™s influence around the globe.
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