New LNG Terminals – Will They Save American Shale?

Over the next five years several new American LNG terminals permitted for export to non-FTA (Free Trade Agreement) countries are slated to debut. This can only be welcome news for U.S.-based shale gas drillers: the current downturn in the price of oil has coincided with substantial declines across the board in the commodity complex, and natural gas has not been an exception. While this sell-off may bring into question groundbreaking on new LNG facilities, the present price declines are not expected to halt construction on any terminals being built currently as most of their planned capacity has already been pre-sold to overseas buyers.

While any added demand for their product LNG exports cause is likely to be welcome to American shale operators, exactly how much of an effect these exports will have on the price of natural gas in the U.S. is an open question. On one hand, the U.S. Energy Information Administration (EIA) has released a study claiming that LNG exports will be mostly beneficial for the country, with a modest impact on natural gas prices as increased demand from LNG exports is offset by increased domestic production. On the other hand, a report by Charles River Associates for Dow Chemical claims just the opposite – that this increase in demand due to LNG will cause natural gas prices to rise substantially over time in the U.S., hurting domestic manufacturers who currently benefit from the low cost of this crucial energy source.

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The full article, along with all maps and graphs, is available in Issue 1 of Shale Gas International Magazine and can be found on page 43.
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