Monday, October 10, 2011

Hurry Up and Drill - So We Can Export it

Millennium Pipeline, Catatonk NY
One of the key selling points that gas industry spokesmen hammer time and again is that shale gas (and other gas) will provide a domestic source of energy for Americans – so we don’t have to import dirty petroleum products from overseas. The gas reservoirs in Marcellus, and now the Utica shales, could last us 20 to 30 years, they say. Maybe even longer.

But over the past half year it’s become clear that economics trumps patriotism. With the price of gas falling – down to around $4/mcf (thousand cubic feet), gas companies are looking beyond our borders to sell their gas. Their reasoning? Too much gas. So they’re asking the US Department of Energy for permission to ship the gas overseas.

Back in May the DOE quietly approved plans for CheniereEnergy to export 2.2 billion cubic feet of natural gas per day from its Sabine Pass, La., port terminal.

Now, Dominion Resources has announced plans to export liquefied natural gas (LNG) to “any country with which the US does not prohibit trade”. The company has already filed with the Department of Energy requesting permission to export up to 1 billion cubic feet per day from its Dominion Cove Point facility on the Chesapeake Bay in Lusby, Md.

There will be many advantages, they point out:
  • It would provide needed markets to support domestic natural gas industry growth;
  • It could improve balance of trade by at least $2.8 billion annually;
  • It could increase government revenue by almost $1 billion annually;
  • It could add more than 7,000 short-term jobs nationally during peak of construction and approximately 14,600 permanent oil and gas industry jobs once in operation.
 I admit, I’m confused. If we’re drilling to stop importing fuel, and we’ve gotta hurry up and get this Supplemental Generic Environmental Impact Statement (SGEIS) approved so the rigs can move into NY to extract this much-needed fuel, why exactly are we giving it away? And if we’re sacrificing clean air and water for an energy source that will reduce our dependence on coal, why are we giving it away? And if we really are “drilling a well to bring home a soldier”, why are we giving it away?


  1. The Sabine Pass facility is only approved to export gas we IMPORTED a few years ago when we thought we were running out. Almost all of the LNG facilities in the past decade -- all but two, are IMPORT ONLY.

  2. Seamus:

    "What if the U.S. Became a Net Exporter of Liquefied Natural Gas?: "...Cheniere Partners (CQP) received permission from the US Department of Energy to export LNG produced in North America from its Sabine Pass terminal. The company had already received permission to re-export imported LNG. Cheniere Partners announced a memorandum of understanding was signed with a Chinese company, ENN Energy Trading Co., to provide the company with 1.5 million metric tons annually of LNG produced at Sabine Pass. Additionally, Cheniere Partners signed a memorandum of agreement with Morgan Stanley Capital Group Inc. The agreement would allow Morgan Stanley to import or export up to 1.7 million metric tons annually from Sabine Pass. Currently, there is one other North American LNG export facility. The US has 10 LNG import terminals where the owners are petitioning the US government for export licenses to join the race to export LNG. We could see the ramp up of export facilities in the near future. This bodes well for the natural gas industry and companies like Chesapeake Energy, Corp. This may be one of the reasons why Carl Icahn recently has taken a 5.8% stake in the company..." " (Seeking Alpha)-

  3. "There Will Be Exports: "..."Shale gas has brought in a flood of supply, and the question is now, what do you do with it?" says Bill Cooper, president of the Center for Liquefied Natural Gas in Washington, D.C. Earlier in the decade, companies began to build facilities that would allow for the importation of liquefied natural gas (LNG). Now the U.S. may have the capacity to become an exporter of natural gas...There are signs that this is happening. Cheniere Energy Partners this summer applied to the Department of Energy to add liquefaction capabilities to its Sabine Pass LNG facility in Louisiana, just over the Texas border. Earlier this month Cheniere signed a memorandum of understanding with a Chinese firm, ENN Energy Trading, in which ENN "intends to contract 1.5 million tonnes per annum…of bi-directional LNG processing capacity." Translation: if Cheniere gets the necessary approvals and installs the necessary equipment, the Chinese company will consider importing natural gas. The Department of Energy and the Federal Energy Regulatory Commission are reviewing Cheniere’s proposal. If things go according to plan, Cheniere could be piping gas onto slow boats to China in 2015..." " (Newsweek)-

  4. "Macquarie in gas tie-up with Freeport LNG: "...The proposal follows a similar move by Cheniere Energy for a combined import and export terminal at Sabine Pass, Louisiana...Projects, such as Freeport and Sabine, could have repercussions for global LNGmarkets. The shale boom has made the country the world’s biggestnatural gas producer, with 57bn cu ft a day of output, according toNikos Tsafos of PFC Energy, the consultancy. If the US exported just a10th of its gas last year, he says, it would have been the world’s topLNG exporter..." "(Stockhouse)-

  5. Here is info about Cheniere's re-export application:

    "Cheniere Marketing, LLC; Application for Blanket Authorization To Export Liquefied Natural Gas: "...The Office of Fossil Energy (FE) of the Department of Energy (DOE) gives notice of receipt of an application, filed on March 23, 2010, by Cheniere Marketing, LLC (CMI), requesting blanket authorization to export liquefied natural gas (LNG) that previously had been imported into the United States from foreign sources..." (Federal Register)-

    Here is info about Sabine's export application. This is for export, not re-export:

    "Sabine Pass Liquefaction, LLC; Application for Long-Term Authorization To Export Liquefied Natural Gas: "...The Office of Fossil Energy (FE) of the Department of Energy (DOE) gives notice of receipt of an application (Application), filed on September 7, 2010, by Sabine Pass Liquefaction, LLC (Sabine Pass), requesting long-term, multi-contract authorization to export up to 16 million metric tons per annum (mtpa) of domestic natural gas as liquefied natural gas (LNG) for a 20-year period..." (Federal Register)-

  6. "Commentary: U.S. Exports of Coal & Natural Gas: "...Just a few years ago, companies were building terminals along the coast to facilitate the importation of clean- burning liquefied natural gas or LNG. But thanks to huge new discoveries and new drilling techniques, the U.S. now has abundant supplies of its own. In September, the Department of Energy approved the application of one of those import terminals in Sabine Pass, Texas, to convert to an export facility. It turns out the U.S. still produces plenty of what the world needs, including energy..." " (Video, PBS Nightly Business Report)-

  7. "China and India see what the US doesn’t - the potential of natural gas: "...And that brings me to the next development. Cheniere Energy has signed an agreement with ENN Energy Trading of China, under which ENN will contract 1.5m tonnes per annum of bi-directional Liquified Natural Gas (LNG) processing capacity at Cheniere’s Sabine Pass LNG terminal in the US. This makes the possiblity of the US exporting its gas to the rest of the world that much more likely to happen. As gas is liquified for ease of use during transport...Europeans and Asians have been eagerly snapping up acreage for several years now. Indeed, Cnooc, the Chinese energy company, in October agreed to pay up to $2.16bn to buy a 33.3 per cent interest in Chesapeake’s Eagle Ford shale play in the largest Chinese investment in the US energy sector..." " (Financial Times)-

  8. "Glut prompts project to chill natural gas for export: "...Freeport LNG is partnering with Australian bank Macquarie to build the capacity to turn U.S. natural gas into a liquid for shipment overseas.The Freeport terminal, which opened on the Texas coast in 2008 to import liquefied natural gas from other countries, has already added the capacity to ship some of that LNG back overseas because of overproduction of the fuel in the U.S...Earlier this month, Cheniere said it also plans to build gas liquefaction capacity to export LNG from its facility in Sabine Pass..." " (Fuel Fix)-

  9. "With natural gas glut, firms bank on exporting: "...The terminal requires approval from the Energy Department and the Federal Energy Regulatory Commission...Demand and prices for liquefied natural gas overseas have remained much higher than in North America, however, leading some U.S. producers to mention exporting it. For example, Chesapeake Energy CEO Aubrey McClendon has suggested exports to boost demand for U.S. natural gas...Freeport plans to seek 20-year contracts for gas exported from the terminal, Smith said. Long-term contracts are needed for financing for the project, he said. Also Monday, Exxon Mobil Corp. said it put on hold plans for a floating liquefied natural gas import terminal off New Jersey, citing changes in its outlook for fuel supply and demand in the region..." " (Texas)-

    "Freeport/Macquarie to Build LNG Export Terminal in Texas: "...Macquarie Energy, the North American energy marketing and trading arm of Macquarie Group (Macquarie), and Freeport LNG Expansion, L.P. (Freeport LNG) today announced an agreement to jointly develop and market liquefaction capacity at Freeport LNG's existing LNG import terminal near Freeport, Texas. The proposed liquefaction facility will be capable of liquefying up to 1.4 billion cubic feet per day (Bcf/d) of natural gas and will create a world-class bi-directional import/export LNG terminal..." " (LNG World News)-

  10. "Chesapeake Energy wants to export LNG" (Oil & Gas Financial Journal)-

  11. "Encana says eyes supplying U.S. natgas for export: "...Encana, which has interests in shale gas formations across the United States, on Monday came out in support of Cheniere Energy's (LNG.A) plan to cool U.S. gas and ship it to markets across the world as liquefied natural gas (LNG)..." " (Reuters)-

  12. "Natural Gas Rebound Looking Likely in 2011: "...Chesapeake Energy's Chief Executive Aubrey McClendon told investors at a conference he has been in talks with Cheniere to supply gas to the proposed facility. While Cheniere would still need to build the liquefaction facility, the company's CEO believes that interest in the project from natural gas suppliers such as Chesapeake, as well as Chinese interest "confirms the global appetite for US natural gas."..." " (CNN Money)-

  13. Nice that other people are catching on to this. I've been researching it for some time as they have been trying to make deals to export LNG for years.

    Gas is cheap and demand is low in the U.S., so to raise prices in the U.S., they want to sell to highest bidders over seas. China, Japan, India, etc. are at all time high demand and cost. Apache, EOG, and Encana plan to export from the Kitimat Terminal.