Thursday, June 10, 2010

LNG About Face at Sabine Pass?

Last week, Cheniere Energy announced plans to add liquefaction capabilities at its Sabine Pass import facility.  Cheniere had the misfortune to develop a large LNG import facility a couple hundred miles south of the Haynesville Shale.  While it sounded like a good idea a few years ago, the facility collects more cobwebs than tanker traffic because the abundance of shale gas in the U.S. and a monumental recession have turned the North American supply/demand relationship on its head.

Creating a bi-directional facility is natural business reaction to the situation in which Cheniere finds itself.  For a lot of reasons, I hope it works.  It sure would be nice to see the gas flowing away from our shores instead of towards it.  South TX/LA doesn't have great proximity to consuming regions in Europe and it likely won't be able to compete on a price basis with Qatari gas, but that market sure can use extra natural gas to support a viable spot market to offset the long-term expensive gas contracts that are in place. 

Keep an eye on this project.  It could have interesting long-term implications both here and abroad (here is a nice piece in the Financial Times about the situation).

1 comment:

Anonymous said...

Interesting fact from the EIA report for March's nat gas numbers: We imported LNG from 6 different countries, the most diverified our imports have ever been. Usually the mix is only 2 or 3.