Tuesday, February 11, 2014

Cameron LNG Receives Export Approval

Today, the Department of Energy approved Sempra Energy's application to allow its Cameron LNG facility to export natural gas to countries without free trade agreements with the U.S.  The Cameron approval is for 1.7 Bcf/day, bringing the approved export quantity to 8.5 Bcf/day.  The project would cost an estimated $10 billion and add three liquefaction trains to the existing facility.

Analysts are divided on how many approvals the DOE will allow.  The government's studies used a 12 Bcf/day threshold figure to conclude that gas exports will not hurt domestic gas users by increasing prices.  There are at least a dozen more open applications still out there, and only a handful are still economically feasible given market dynamics.  There are only so many export contracts that can be negotiated with customers, especially given the large scale LNG export facilities in the Middle East and prospective for Australia.  Additionally, investors will  (should) recognize a limit to export potential, and later facilities likely won't be financed.

I don't know nuthin' from nothin', but I would expect to see three (+/- 1) more approvals before permitting is paused to see the impact of the first operational export facilities.  It doesn't do anyone - LNG developers, investors, gas producers or domestic gas customers - any favors to over permit export capacity.  There are enough white elephants in the world already.

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