LNG:

Export 'winners' go beyond U.S. borders

Natural gas analysts responded positively yesterday to the Department of Energy's release of a report that underscored the economic benefits of exporting liquefied natural gas, highlighting some of the broad swath of export, production, manufacturing and transport companies poised to benefit from an expanded industry.

The report, a study commissioned by DOE and carried out by NERA Economic Consulting, said complex, two-stage modeling of U.S. and world natural gas prices and economic factors shows that allowing large volumes of LNG to be exported would benefit the domestic economy (EnergyWire, Dec. 6).

The study presented a generally positive outlook on exports, though it noted that some groups, including uninvested wage earners and manufacturing industries with high energy costs, would lose out thanks to higher natural gas prices.

Nonetheless, many observers hailed it as a signal of future LNG industry growth.

Yesterday, a slew of analyst reports responded to the study by highlighting companies that could profit if DOE moves quickly to approve some of the 15 projects that have applied for permission to export LNG to countries with which the United States lacks a free-trade agreement.

Eight projects will move to the head of the line for DOE consideration under the rules announced by DOE along with the report's publication, thanks to their status as also pending in a pre-filing process with the Federal Energy Regulatory Commission:

  • The Quintana Island project by Freeport LNG Development LP.
  • The Lake Charles/Trunkline project by Energy Transfer Partners and BG Group PLC.
  • The Cove Point LNG project by Dominion Resources Inc.
  • The Jordan Cove Energy Project in Coos Bay, Ore.
  • The Cameron LNG project by Sempra Energy.
  • The Oregon LNG project in Astoria, Ore.
  • The Lavaca Bay, Texas, project by Excelerate Liquefaction.
  • The Corpus Christi project by Cheniere Energy.

In addition to stakeholders in those projects and the upstream natural gas producers with whom they have supply agreements, an army of drilling equipment makers, steel manufacturers, logistics companies and other oil- and gas-industry suppliers would likely see new export-linked demand if and when projects get off the ground.

Other apparent winners if LNG exports are green-lighted include companies such as Golar LNG Ltd. and GasLog Ltd., two big names in the small field of companies owning LNG transport tankers.

Some international players would also profit from a robust U.S. LNG industry. Korean and Japanese shipbuilders, and newer competitors in China, stand to benefit from new tanker orders aimed to bolster a global fleet that is already stretched (EnergyWire, April 11).

Hidehiro Muramatsu, general manager of the Washington, D.C., office of the Japan Oil, Gas and Metals National Corp. (JOGMEC), said it was too early to gauge Japanese reaction to the DOE study. "I think it would be a positive sign for DOE approval [of exports to nonfree-trade partners] in the very near future, but we will wait and see the comments" submitted on the report through the public comment process, Muramatsu said.

'A very pro-trade study'

Kevin Book, managing director at ClearView Energy Partners, an investment advisory firm, agreed that the new report offers hope for LNG industry stakeholders. "It's a very pro-trade study," he said.

To that extent, it could further spook Gazprom, the Russian oil and gas monopoly that has already seen its business model disrupted by the tail-off in U.S. natural gas imports, Book suggested.

"Natural gas didn't even have to begin shipping from the U.S. to Europe to hurt Gazprom," Book noted, as cargoes previously destined for the United States landed on the other side of the Atlantic, leading Gazprom customers to agitate for more favorable pricing from their longtime supplier (EnergyWire, Nov. 6).

"The cumulative effect of every new LNG terminal is going to weaken Russia's hold on their eastbound market," Book said.

Suggesting that European anxiety about hydraulic fracturing may be, in part, fomented by Gazprom to undermine potential shale gas production there, he said the company could seek to exert more influence in the United States in an effort to prevent significant exports from going forward.

But Michael Levi, a senior fellow at the Council on Foreign Relations who tracks LNG export issues, said the report changes little.

"This is a contractor report. ... It was never intended to be a policy report," he said, suggesting a "misconception" that the study would clearly pave a path for DOE's export decision. "Of course what came out said that it's a mixed bag, and you still need to think and make decisions."

Levi noted that while the study highlighted positive net impacts on the domestic economy, the overall effects it predicted, framed against the scope of the entire economy, are small.

"This isn't some singularly important change," Levi said. "For those people who are out there saying that exports would transform the American economy, this study says that they're wrong. ... For people out there saying that this is going to suck our manufacturing sector dry, this also undermines that."

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