First U.S. LNG terminal ready to start exporting shale gas

LNG Tanker
Source: DollarPhotoClub

Sabine Pass Terminal – owned by Cheniere Energy – is readying to become the first terminal to export natural gas from America’s shale formations, according to ING Capital LLC, which helped finance the project.

As Bloomberg reported on December 31st, the Louisiana-based terminal is receiving as much as 50 million cubic feet of gas per day. The fuel is being chilled and liquefied to 1/600th of its volume in preparation for export via tankers. The first cargo is scheduled to leave the terminal in January, with the BG Group having the distinction of being the first client. This will be a moment of historical importance as the gas in the cargo will for the first time come from the lower-48 states.

Nobody is expecting a revolution, but just as with the repeal of the crude export ban in December, it’s a step in the right direction. U.S. is awash with gas, often stranded in areas lacking pipelines and impossible to bring to market. New pipelines are being built – some of them leading to LNG export terminals just like Sabine Pass. The Cheniere terminal in Louisiana is just the tip of the iceberg; the U.S. Department of Energy website shows that as of July 2015, 13 applications for export of domestically generated natural gas to non-FTA (Free Trade Agreement) countries for firms in the continental U.S. had been approved, either fully or conditionally, while 32 were under review and pending approval. The next to come online are: Freeport LNG in Freeport, Texas aiming for 2017 operations, and Dominion Resources’ Cove Point, Maryland terminal expected to be operational in late 2017. All in all the U.S. may be capable of exporting 7.76 billion cubic feet of gas a day by 2019, a Bloomberg New Energy Finance analysis shows.

It is true that it is not the best time to debut as an LNG export terminal. As Bloomberg points out, natural gas futures have plunged more than 80 percent from 2008 highs to a 16-year low early in December on the New York Mercantile Exchange. February contracts rose 5.6 percent to settle at $2.337 per million British thermal units by the end of the month.

While not long ago Asian markets seemed to be the most lucrative destination for American LNG, this demand has now weakened and U.S. companies increasingly look toward Europe with its high dependence on Russian gas. The countries most reliant on Russian gas suppliers are historically those most uneasy about such dependence – ex-Communist countries like Lithuania or Poland, which – incidentally – have both built large LNG import terminals in Klaipeda and Swinouscie respectively.

Although Sabine Pass has the distinction of being the first U.S. LNG export terminal, it still needs authorization from the Federal Energy Regulatory Commission’s director of energy projects “to initiate commercial service” of its first liquefaction plant.

“Commissioning and testing activities will initially produce minimal quantities of liquefied gas and is expected to increase in quantity during start-up activities, which are required to bring the train online to verify performance and functionality,” Tamara Young-Allen, a spokeswoman at the Washington-based agency told Bloomberg.

Also, Cheniere still plans to invest more in the expansion of the terminal, which ultimately is to have at least six “trains” that produce LNG by late 2018, allowing it to supply more than 3.5 billion cubic feet a day. The project is estimated to cost at least $15 billion.

Source: Bloomberg

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