Houston-based Cheniere Energy Inc. (AMEX: LNG) has received federal approval for construction of the largest U.S. natural gas export terminal.
The $10 billion facility – the Sabine Pass LNG terminal – to be built in Cameron, Louisiana will coin Cheniere Energy the first large-scale natural gas exporter in the U.S.
U.S. natural gas futures sank to less than $2.00 on April 13, the lowest in the past ten years, and has lost 87 percent of its value since 2005.
The overwhelming surplus in natural gas supplies prompted importers of liquefied natural gas (LNG) to export the fuel to Asian energy markets. Cheniere's competitors in Indonesia, Yemen, Qatar, and Australia are currently charging Japanese and South Korean utilities up to ten times the price of U.S. suppliers.
“This will potentially help others who are looking to export LNG from the U.S. to use Cheniere as a template" said Deutsche Bank analyst, John Hirjee.
Complaints from the Peanut Gallery
Despite the Federal Energy Regulatory Commission (FERC) issuing a statement about the minimal environmental impacts of the export terminal, environmental groups are raising concerns about the carbon dioxide emitted from converting natural gas to liquid. Other critics assert that exporting the fuel will increase prices for domestic users.
Cheniere already has a lengthy list of eager LNG customers including London-based BG Group, Gas Natural Fenosa in Barcelona, GAIL India, and Korea Gas Corp, the world's largest LNG importer.
Natural gas prices outside the U.S. have not been affected by the oversupply and will likely continue to rise and remain elevated over the next six years. U.S. exporters, like first-timer Cheniere can capitalize on the limited market and financial gains to be had before new LNG projects in Australia commence operations in the latter portion of the decade, which will likely expand global supplies enough to drive down international natural gas prices.
The LNG exporter expects operations at its Louisiana-based Sabine Pass plant to commence in 2015.
Cheniere Energy shares were up 3.06 percent from a previous close at 16.99 as of 12:45pm Tuesday.
Until next time,