LNG Exports to Double | Russell T. Rudy Energy LLC
“World Oil” reports that the U. S. and Cheniere Energy (the only company actually exporting liquefied natural gas, or LNG) are set to double exports. The Federal Energy Regulatory Commission has given its approval to open two more process trains at the company’s Sabine Pass facility and ship it to overseas customers.
In a recently released notice, the agency found that the plant “has been constructed in accordance with commission approval and applicable standards and can be expected to operate safely as designed.” The Sabine Pass facility currently can process 1.3 billion cubic feet of gas per day (bcfgd). Having cleared this regulatory hurdle, additional gas is expected to be processed next year.
The international LNG market has recently been flooded with additional supply from the U. S. and Australia. Concurrently, established Asian economies are slowing, as is their demand for energy. The potential for oversupply could last until 2020 when consumption of LNG is expected to align with production. All this makes expanding LNG exports sound risky. However, Cheniere has mitigated this risk with20 year take or pay contracts. Under these agreements, purchasers have to pay Cheniere a fixed amount whether or not they actually take any LNG. One of these is with Royal Dutch Shell and takes effect in December. A second, with Spain’s Gas Natural Fenosa, starts in September of 2017.
Cheniere’s exports have already helped reduce a domestic natural gas glut and enabled prices to recover. In addition to the economic benefits to the U. S., there are also geopolitical ones as well. Our LNG will provide our European allies with another natural gas option. Currently Norway and Russia provide the product via pipeline, and Qatar supplies LNG via tankers. While Norway is a reliable and stable source, Russia’s intentions are not always aligned with those of the western democracies, and Qatar is in a potentially unstable region.
To read the article in its entirety, please go to http://www.worldoil.com/news/2016/10/12/us-set-to-double-the-shale-gas-it-sends-overseas .
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