Natural Gas Prices Rally After Energy Department Announcement

Natural Gas Prices Rally After Energy Department Announcement

Natural gas prices are on the rise again after the Energy Department announced its approval of the first LNG terminal since 2011.

The Freeport Development LP’s project on Quintana Island, Texas, is the second facility to receive approval from the Energy Department to send gas to countries without free-trade agreements with the United States. The terminal still needs approval from the Federal Energy Regulatory Commission. Anticipated export capacity was announced at 1.4 billion cubic feet a day for the ConocoPhillips, Dow Chemical Co., and Osaka Gas Co. joint venture.

London based Goldman Sachs analyst Samantha Dart said in a report emailed to BusinessWeek on May 21 that, “These recent developments support our view that at least 6.8 billion cubic feet a day of liquefaction of capacity will be built in the U.S.”

Proposed Liquefaction facilities (Trains 1 – 3) at Quintana Island Terminal (courtesy of freeportlng.com)

Cheniere Energy

The Energy Department approved Cheniere Energy Inc.’s Sabine Pass LNG Terminal, located in Louisiana, in May 2011 for exports of as much as 2.2 billion cubic feet a day. Just last month, the Sabine Pass LNG Terminal entered into its sixth LNG Purchase and Sale Agreement with Centrica.

Future of LNG Exports

At least twenty applications for export terminals have been submitted in recent months to the Energy Department, which could export the equivalent of 41 percent of U.S. total production this year according to Energy Department data. Those proposed projects will be reviewed for approval by the Energy Department on a case-by-case basis.

London based Goldman Sachs analyst Samantha Dart said in a report emailed to BusinessWeek on May 21 that, “These recent developments support our view that at least 6.8 billion cubic feet a day of liquefaction of capacity will be built in the U.S.”

Arguments for increasing exports at a much more dramatic pace seem to be losing traction. Recent reports following the Freeport announcement are suggesting only two more projects will need approval by mid-2016 to reach 6.5 billion cubic feet a day of gas by 2020, according to New York based Morgan Stanley analyst, Adam Longson.

Those against exporting LNG contend that allowing unlimited export of the gas could raise prices for US consumers – which already rings true simply based on announcements. Proponents for LNG exports believe that without the US’s participation in the process, we will fall behind as terminals are built abroad.

/ Energy Buzz, National, Texas

Share the Post