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US must fast-track LNG exports

LNG Industry,

Despite the fact that fracking technology has placed the US as the largest natural gas producer in the world, an analyst from the research and consulting firm GlobalData has said that the country’s lack of approved LNG export terminals has prevented energy companies from competing in the growing global LNG market.

According to Carmine Rositano, GlobalData's Managing Analyst covering Downstream Oil & Gas, the global LNG capacity will increase at an average 10% a year from 2013 to 2017. Meanwhile, the US LNG capacity will be competing with new liquefaction coming online in Papa New Guinea and Australia, with the Gladstone, Gorgon, Wheatstone and Queensland terminals increasing Australia’s LNG capacity by 10 billion ft3/d over 2013 levels.

GlobalData has forecast that the US liquefaction will only have a 5% share of the global LNG capacity in 2017, while Australia and Qatar will have 20% and 16%, respectively.

Rositano said that the Asian market would remain the key focus of LNG exports, although areas such as Europe would increase imports as they look to wean off gas supply from Russia.

GlobalData believes that while President Barack Obama’s administration has supported the export of LNG, acquiring all the necessary local, state, environmental and federal approvals is a complex process that takes many years to finalise.

A key disadvantage within the approval process is that exports from US facilities can only be sold to countries with Free Trade Agreements (FTAs). Only special approval from the Department of Energy (DOE) can allow exportation to non-FTA countries, where, located, according to GlobalData, most of the LNG demand is.

Rositano remarked on this: “To date, over 30 applications have been filed with the DOE to sell LNG. However, only seven terminals have been approved to export LNG to non-FTA countries and only one facility, the Sabine Pass LNG Terminal, has received all necessary approvals.

“Being able to sell LNG to non-FTA countries, such as China, Japan, Taiwan and India, is critical to success since these are key markets in the growing LNG trade. Without this approval, commercial risks would be increased and projects would be deemed commercially unviable.”

Despite the hurdles, the analyst believes that there are many advantages in building LNG export facilities, including more employment opportunities, increasing local revenues and lowered trade deficit.

“With economic advantages and reduced geopolitical risks on the line, there is an evident need to fast-track LNG projects, allowing the US to maximise benefits from its domestic energy resource base,” Rositano concluded.

Comments provided by Carmine Rositano, GlobalData's Managing Analyst covering Downstream Oil & Gas.

Adapted from press release by Ted Monroe

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