The new LNG export play
When it comes to liquefied natural gas, the United States has largely been an importer. But export is the new game, and the corridor is emerging as a major player.
Cheniere Energy, which owns the Sabine Pass Terminal in Lake Charles, got the go-ahead from the Department of Energy in May to export liquefied natural gas. That made Sabine Pass—which opened in 2008 as a terminal to take in shipments from overseas—the first bi-directional LNG processing facility capable of importing and exporting the super-chilled liquid.
Then came word two months later that Lake Charles Exports—a subsidiary of Houston-based Southern Union Co. and BG Group—got the go-ahead to ship exports from its Trunkline terminal, also in Lake Charles. Trunkline was authorized to import LNG in the late 1970s and opened in 1981.
The natural gas production boom that has come with the expanded development of shale formations in Louisiana and elsewhere has led to an oversupply of the fuel, making export projects more attractive. At press time, eight other North American LNG export projects were awaiting approval from regulators as U.S. natural gas producers look for ways to move their low-cost gas overseas.
Record Japanese imports to replace nuclear power after the Fukushima Dai-Ichi disaster, plus a 27% jump in China's first-half purchases, may send prices to about $20 per million British thermal units this winter, up 71% from 2010 and the highest price since 2008, according to data compiled by Bloomberg News. The world's spare production capacity shrank about 50% this year, as consumption grew, and is projected to continue declining through 2014.
With the shift from imports to exports comes the need to upgrade the terminals to be able to liquefy the gas for shipping. The exported gas will be carried on tankers after being chilled to super-low temperatures, which makes it easier to transport by ship.
In September, Cheniere announced it will invest $6.5 billion in the Sabine Pass terminal—marking one of the largest capital investments in Louisiana history. Construction on the new facility on the Louisiana/Texas border will begin in early 2012, with hiring of the new permanent employees in 2014. The company will open the liquefaction facility in 2015, and the second phase of the project is expected to be completed by the end of 2018.
"The construction of Cheniere's liquefaction project in Cameron Parish will provide key support to Louisiana's economy and natural gas industry, which has been transformed by the development of the Haynesville Shale," says Cheniere Energy Chairman & CEO Charif Souki. "In only two years, Louisiana's natural gas production has doubled as the Haynesville has grown into one of the most prolific shale plays in the world."
Southern Union's preliminary cost estimate to modify its terminal to liquefy about 2 billion cubic feet of natural gas per day is $2 billion to $3 billion.
"We expect to see even more massive capital investment projects associated with the Haynesville Shale announced in Louisiana over the next few years," says Louisiana Economic Development secretary Stephen Moret. "The economic benefits of historically low, stable natural gas prices in Louisiana have only begun to be realized."
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