Investing in Natural Gas Exports

Brian Hicks

Written By Brian Hicks

Posted May 9, 2013

The time has come to where the U.S. finds itself at a crossroads on natural gas exports. To export or not to export; that is the question.

And while it’s true that U.S. natural gas exports have doubled since 2007 to our neighbors in Canada and Mexico, the U.S. hasn’t sent one iota of gas to anywhere else in the world.

But should we?

LNG terminalSome say that by not opening up to exporting natural gas with other nations, the U.S. is squandering great trade and geopolitical benefits, while others argue that exports will destroy the cost advantages created by the shale boom.

These questions are coming to a head as the Energy Department is reviewing several applications by companies that are gung-ho to send their overabundance of produced natural gas to other nations.

And all sides are weighing in on the matter.


Two former Democratic senators, J. Bennett Johnston of Louisiana and Byron Dorgan of North Dakota, feel strongly that natural gas exports should lie with the responsibility of the private sector, not the federal government.

Johnston chaired the Senate Energy and Natural Resources Committee from 1987 to 1995. Dorgan, his cohort in this matter, is co-chairman of the Bipartisan Policy Center’s Energy Project.

Together, the two sat side-by-side at last Tuesday’s House Energy and Commerce Committee subpanel as they expressed to lawmakers how they felt.

From their point of view, the markets that play into the export of natural gas are constantly changing month to month, even daily. These factors are simply too dynamic and variable to put into the hands of the federal government.

Factors they cited were expenses like fluctuating labor rates, interest rates. and the cost of fuel.

The market should ultimately control this export as these variables change, not government policy that can’t adhere to these changes.

The President

President Obama has a big decision to make, and ultimately, for better or for worse, this decision boils down to him. And it looks like he’s leaning towards gas exports.

Last week, at the economic development forum in Costa Rica, he fueled export hopefuls when he said that by 2020 the U.S. will likely be a net natural gas exporter, and that when it does happen, lower costs throughout the hemisphere and in Central America will be on the agenda.

Right now the pros and cons are being weighed out in the oval office.

There is a lobby group of energy manufacturers who are emphatically urging the administration to limit export permits. This group is made up of The Dow Chemical Group (NYSE: DOW) and Alcoa Inc. (NYSE: AA), among others.

Their main argument is for the present price of cheap domestic gas. Exporting to other nations will disrupt that advantage.

But on the other side, if exports are restricted, it sends a terrible message to other countries that the U.S. does not support free trade like it says it does. With distrust from around the world already, that’s the last thing the U.S. needs.


India is one nation not afraid to express its desire for U.S. natural gas. They advocate that it’s a ‘win-win’ for both nations.

Right now, the U.S. has solidified itself as one of the world’s top gas producing countries, and soon enough, around 2020, total production of natural gas will exceed domestic consumption, according to the Energy Information Administration.

Companies are going to want to seek out new markets, and this would include India, where there is significant potential to tap into all segments of natural gas: power, transportation, agriculture, aviation, and the list goes on.

The Indian ambassador to the U.S. said, according to the Economic Times:

“This would result in cheaper electricity, lower subsidies on urea and other nitrogenous fertilizers, and a more economical fuel for a variety of industrial and consumptive gas usages. Thus, there is a clear and present benefit to India, if exports of US natural gas are permitted to India.”

And the U.S. would reap its own rewards: job growth and a more progressive U.S. economy; power and influence would increase; relationships would be strengthened with allies; new bonds would be forged; and it would further weaken adversaries such as Iran.

India is already heavily invested in U.S. natural gas, as it has its hands in different liquefaction terminals in the U.S. that will come online in the future.

U.S. Export Terminals

This is a true sign of things to come. Right now the whole industry seems to be having a stab at the natural gas export debate. There are 12 proposed export terminals sitting and waiting on the table for the go ahead from the U.S. government, according to the FERC:

  • Freeport, TX: 1.8 Bcfd (Freeport LNG Dev/Freeport LNG Expansion/FLNG Liquefaction)
  • Corpus Christi, TX: 2.1 Bcfd (Cheniere (NYSE: LNG) – Corpus Christi LNG)
  • Coos Bay, OR: 0.9 Bcfd (Jordan Cove Energy Project)
  • Lake Charles, LA: 2.4 Bcfd (Southern Union – Trunkline LNG)
  • Hackberry, LA: 1.7 Bcfd (Sempra (NYSE: SRE) – Cameron LNG)
  • Cove Point, MD: 0.82 Bcfd (Dominion (NYSE: D) – Cove Point LNG)
  • Astoria, OR: 1.3 Bcfd (Oregon LNG)
  • Lavaca Bay, TX: 1.38 Bcfd (Excelerate Liquefaction)
  • Elba Island, GA: 0.35 Bcfd (Southern LNG Company)
  • Sabine Pass, LA: 1.3 Bcfd (Sabine Pass Liquefaction)
  • Lake Charles, LA: 1.07 Bcfd (Magnolia LNG)
  • Plaquemines Parish, LA: 1.07 Bcfd (CE FLNG)

And thus far, the Department of Energy has granted just one lone soldier permission to export natural gas to countries outside the Free Trade Agreement (FTA).

Cheniere Energy and its Sabine Pass LNG terminal will be the first to venture out into natural gas exports. Its 2.6 billion cubic feet per day (Bcfd) is expected to begin operation in 2015 or 2016.

For now, the rest of the projects are just sitting in limbo, unsure of how long their proposals will sit and collect dust. But there are reasons to get things rolling.

Geopolitical issues are a surefire way to ignite the export fire. Free trade and the U.S.A. are synonymous; to have a policy that restricts exports would go against something that is ingrained in the American way.

LNG exports would also limit Russia’s ability to divide the U.S. from its European allies.

It would also help loosen the grip that China has on rare-earth metals and its current export restrictions it has in place. The U.S. has been ruling against China during World Trade Organization meetings. By limiting our own resources, it would be hypocritical for the U.S. to enact similar policies with natural gas.

But we’ll have to wait and see. The Sabine Pass LNG terminal will be the guinea pig, and it is uncertain how fast things will move before that comes online. The weight of ex-senators like J. Bennett Johnston and Byron Dorgan, as well as nations like India, who eagerly push for U.S. natural gas, gives President Obama a lot to think about.

Perhaps it is better to look before we leap.


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