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Exxon Aiming to Build LNG Export Terminal

Written By Brianna Panzica

Posted August 22, 2012

On Friday, ExxonMobil Corporation (NYSE: XOM) and Qatar Petroleum International submitted an application to the Department of Energy and the Federal Energy Regulatory Commission for a permit to export liquefied natural gas (LNG).

Exxon and Qatar Petroleum jointly own Golden Pass Products, operator of an LNG import terminal in Sabine Pass, Texas. Exxon holds a 30% stake and Qatar owns 70%.

The facility has a 69-mile pipeline system, five LNG storage tanks, and access to the Houston Ship Channel. And the export terminal would be an expansion of this.

It’s not far from the U.S.’s only approved LNG export facility, Cheniere Energy’s (NYSEAMEX: LNG) Sabine, Louisiana terminal, which is currently under construction and expected to begin exports of 2.6 billion cubic feet per day (Bcf/d) to the U.K., South Korea, India, and Spain by 2015.

And it’s not the only other LNG export facility in the U.S. pending approval. The FERC showed that, as of July 17 this year, there were seven other facilities proposed for Freeport and Corpus Christi in Texas, Coos Bay and Astoria in Oregon, Lake Charles and Hackberry in Louisiana, and Cove Point, Maryland.

But it’s a big enough move to grab the industry’s attention, considering Exxon is the U.S.’s top natural gas producer.

The expansions to the facility would cost around $10 billion and allow exports of 2 Bcf/d, or 15.6 million tons each year, to nations with a free-trade agreement with the U.S. The company boasts that it would create roughly 9,000 construction jobs over the estimated five years of building.

The U.S. has a number of LNG import facilities along its coast, but the nation never had a reason to export natural gas.

Now, however, the shale gas boom has led to a huge stockpile of natural gas, pushing prices below $3 per million British thermal units. Elsewhere, the prices are much higher. The U.S. produces roughly 72 Bcf/d, and exports could do great things for the national economy.

But import facilities can’t be easily transformed into export terminals overnight. In order to liquefy natural gas, it must be cooled, so export terminals require the construction of pre-treatment and liquefaction facilities. For Exxon, this could take five years or more. Seeking Alpha believes this might be more like six to eight years.

In order for LNG exports to be successful, however, natural gas prices must remain low in the United States. Exports run the risk of pushing prices up, unless of course drilling companies increase production. This will likely take better technologies, which are currently under development, to draw more of the resource out of existing wells.

But natural gas exports have also drawn serious criticism – and one of these critics is oil executive T. Boone Pickens. In June he said in a letter to USA Today:

“We will go down as the dumbest generation ever if we export our clean, cheap, abundant supplies of natural gas in favor of dirtier, more expensive OPEC oil. Why let our foreign competitors take advantage of our cheap energy?”

Obviously, he has a point. But we can’t rely on this resource for transportation, as vehicles have yet to begin a full transition over to natural gas-powered engines. It still will take some work to allow for the adoption of natural gas on a level that will leave us independent from OPEC.

And companies have had to slow down drilling and reduce the number of wells anyway because of the low gas prices. Even Exxon has reduced its wells this year.

The export facility could be a great boost to Exxon’s bottom line over the long-term. Prices for the exported gas would be higher, and if it could begin exports, it might be able to get its well numbers back up again to support a heavier resource flow.

Exxon has assets in a number of major U.S. shale plays, including the Bakken, Eagle Ford, Barnett, Utica shale, and Marcellus shale. It is expected to end 2012 with a production rate of 3.7 Bcf/d.

Exxon closed up 0.31% on Monday at $87.73.

That’s all for now,

Brianna Panzica

follow basic@brianna_panzica on Twitter

Energy & Capital’s modern energy guru, Brianna digs deep into the industry with accurate and insightful updates into the biggest energy companies and events. She stays up to date with the latest market moves and industry finds, bringing readers a unique view of current energy trends.

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