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Fitch: US closer to LNG exports

LNG Industry,

The recent final approvals and construction groundbreakings for several LNG export facilities in the US Gulf Coast will make LNG exports a reality in the near term, Fitch Ratings reports.

The US Department of Energy (DOE) recently approved Freeport LNG's Expansion and liquefaction facility. Freeport and Cameron LNG have broken ground on export facilities and Sabine Pass is in advanced construction, moving the US closer to becoming a major exporter of LNG.

Authorisation changes

The DOE recently stopped reviewing non-Free Trade Agreement (FTA) export applications. Instead it will only act on applications after the review required by the National Environmental Policy Act (NEPA) has been completed and suspend its practice of issuing conditional decisions prior to final authorisation decisions. While Fitch believes this may quicken the pace of approvals, the actual timing and overall number of approvals remain unknown.

With Freeport LNG, Cameron LNG, and Dominion's Cove Point LNG projects underway and Cheniere set to finish construction on Sabine Pass and start exporting gas in late 2015, the US is moving closer to becoming a larger scale energy exporter. Whether or not this will have a meaningful impact on gas price remains unclear as the approved levels of export activity remain a small percentage of total US gas production.

Energy diversification

The emergence of US LNG exports is contributing to the energy diversification strategy in countries such as Japan that have been reliant on nuclear energy. However, the additional LNG capacity from the US is not expected to dramatically affect global pricing, as the projected US volumes are insufficient to materially alter the balance of global supply and demand.

With final approvals received and construction underway at Cameron and Freeport, there are currently three LNG export projects under construction in the US, representing approximately 3.7 billion ft3/d of liquefaction capacity. Upwards of 28 billion ft3/d of capacity remains in the queue for DOE or FERC approval before being able to commence construction.

Fitch concludes that these approvals are critical to the success of those facilities as non-FTA countries are the majority of the potential LNG market.

Adapted from press release by Katie Woodward

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