Exporting Natural Gas is Fact, not Fiction

Cheniere Energy's Sabine Pass LNG terminal near Cameron, La.

Landmen are once again roaming the hills of the Southern Tier of New York, hoping to entice landowners to sign leases allowing drillers to extract natural gas. One of their mantras is that this fuel will provide domestic energy for US consumers and free us from dependence on foreign oil.

What they don’t say is that for the past couple of years these same energy companies have been lobbying the federal government for permits to build LNG export facilities – or modify import facilities so they can export the gas. So, let’s catch up on the news….

On Tuesday Reuters reported that Cheniere Energy is building a $5.6 billion project in Sabine Pass, Louisiana. The project, expected to be ready by 2015, is getting a $1 billion boost from China and Singapore.

“New technology,” writes Stephen Aldred, “has opened up supply of natural gas from previously inaccessible shale fields in the U.S., altering the global dynamics of the industry, and turning the country from an importer to a potential exporter.” He notes that Cheniere has already signed long-term commercial contracts to supply gas to India and Korea.

Then yesterday, a reporter from South Korea Public Television called a colleague in Pennsylvania’s GasLand to arrange a tour of PA gas fields and to speak with residents. “He said the US Chamber of Commerce and the US State Department went to his country to promote shale gas,” she says. “His country is considering importing natural gas.......liquified natural gas.......to meet their energy needs.”

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?

We Need to Drill More Gas!

One of the biggest points the landmen – and the gas industry – makes when they try to get you to sign their lease is that the gas they drill will help fuel America. American gas drilled from American farms, fields, forests and elementary school playgrounds will help get our country off its dependence on foreign fossil fuels.

That’s what they say anyway.

But according to Rigzone (an industry newsletter) and a recent article in Bloomberg News, there is too much gas, so companies are exporting it to Mexico (and China and other places). According to Rigzone, exports of US natural gas into Mexico are expected to average 1.3 Bcf/d – that’s billion cubic feet per day – up  450 million cubic feet per day (MMcf/d) from 2010.

According to a mid-June report from Barclays Capital, Mexico will need even more gas to meet their demands, and that could lead to further US exports in 2012.

Exporting gas to Mexico is not new – we’ve been doing it for at least a decade, shipping about 850 MMcf/day. What has changed is the amount; in the first quarter of 2011 the exports averaged highest in the past decade.

It’s not a lot of gas – only one percent says Rigzone. But it is starting to add up and several factors suggest the trend towards increased exports could continue over the next few years. In fact, Barclays believes US will increase exports by another 200 MMcf/d next year, bringing the average exports to 1.5 Bcf/d.

And that’s just Mexico. Barclays also noted increased export activity to Asia and Europe, and some port cities are gearing up with LPG terminals.

So much for made-in-America energy fueling American homes…. It looks like the real agenda is to drill as much as possible as fast as possible to make as many bucks as possible before the energy bubble bursts.