Shale Revolutionizes LNG | Russell T. Rudy Energy LLC
“Rigzone” reports that the shale revolution flooded the domestic market with so much natural gas that prices fell to a 17 year low. Now shale is revolutionizing the global liquefied natural gas (LNG) market.
With all the surplus shale gas in the U. S., operators had to find additional markets. Pipeline exports to Canada and Mexico helped, and fuel substitution for coal at power plants did its part. However, there was still so much gas that entrepreneurs are in the process of converting the U. S. from an importer of LNG to an exporter for the first time.
While only Cheniere Energy’s Sabine Pass, LA, facility is shipping, this is just the beginning. By 2020 five liquefaction plants are scheduled to come on line along the Gulf Coast and in Maryland. At that point the U. S. is expected to increase exports by 45% and jump from last place among producers to third with a 14% market share.
The U. S. influence in the market is not just due to large volumes of shale gas looking for a market. Rather, deal structure, the expansion of the Panama Canal, and new markets have all played a part.
Other LNG producers insist on long term contracts with specified delivery points. Alternatively, U. S. producers are offering more flexible deals which allow purchasers to buy more than they consume domestically and broker the excess to other countries. This has encouraged purchasers to contract for larger volumes and has enticed all the major traders to get involved in the LNG spot market. Consequently, LNG has surpassed iron ore in the commodity trading market and is second only to crude.
The recent expansion of the Panama Canal has greatly enhanced the competitiveness of U. S. LNG in Pacific rim markets. Cheniere Energy is already shipping via the canal and the U. S. Energy Information Administration projects that by 2012 an estimated 550 tankers will be going through the waterway.
The large volumes and low prices of U. S. origin LNG are enabling producers to compete with coal for power generation in Europe. Poland recently took its first cargo of LNG. Poor nations such as Egypt, Jordan and Pakistan are importing LNG for the first time and Indonesia is converting its Arun plant from an export, to an import, facility.
Technology has also aided in opening new markets. Floating regasification units are cheaper and smaller offering more flexibility for purchasers. Bangladesh, Egypt and Pakistan are all taking advantage of this relatively low cost alternative to import LNG.
With domestic gas prices still at depressed levels we need all the new help we can get.
To read the article in its entirety, please go to http://www.rigzone.com/news/article.asp?hpf=1&a_id=145880&utm .
Russell T. Rudy Energy, LLC buys oil, gas and mineral interests nationwide. Please call (800-880-0940), or write (info@rudyenergy.com ) to let us know if you agree, disagree or would just like to comment on this, or any of our posts.
