Friday, October 8, 2010

More on LNG Export

The Financial Times had a nice piece about the potential for the U.S. to become a natural gas exporter (registration may be required).  I won't regurgitate the article, but there were a couple of interesting points.

The article notes that if the U.S. exported 10% of its 2009 production it would have been the largest LNG exporter in the world.  Very interesting, but I don't think that statistic takes into account the huge LNG export infrastructure that recently opened in Qatar.  The article also notes that the U.S. has a low natural gas extraction costs.  True, but again, I don't think it compares favorably to Qatar.  Nor does it take into account the distance North American gas would have to travel to get to customers.

Economics will be the issue.  We have relatively low cost gas, but North America is pretty far away from the big gas consuming regions of the world in Europe and Asia.  The article points out that the places most favorable to North American gas are Asia and southern Europe.

What is clear is that with the advent of shale gas, the U.S. doesn't need more (or any?) LNG import terminals.  Converting these terminals for export generally is a good idea, but the big question is economics.  Most terminals are in the Southeast and East.  Are they located in the right place to target the best customers?  With the exception of Alaska, the natural gas production growth areas are highly focused in the central and eastern portions of the country, and most of it is east of the Rocky Mountains.  Can we build a big enough customer base to make LNG export work?  No doubt it will be a hot topic for discussion.

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