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Terminal Developer Bullish on U.S. Ability to Attract LNG

Whether the U.S. gas market will receive an infusion of liquefied natural gas (LNG) in the coming years depends a lot upon what happens in European gas markets, according to an executive with a Gulf Coast regasification terminal developer.

Davis Thames, president of Cheniere Marketing Inc., an affiliate of Cheniere Energy Inc. -- developer of the Sabine Pass terminal in Cameron Parish, LA, and two others along the Gulf Coast (see NGI, Mar. 3) -- said that while some think the United States will struggle for LNG supply, in the next two or three years there will be 10 Bcf/d worth of LNG looking for a home. And it will be heading for the United States.

"We're the only market that's flexible enough in our market structure, delivery structure, storage inventory levels, the amount of storage we have available, the amount of demand that's created from power generation...," he said. When prices moderate on the world market, the amount of LNG that will be available to the U.S. market "is absolutely tremendous."

Thames, who spoke at a University of Houston Global Energy Management Institute conference last week, said he does not see European markets providing much competition to the United States for LNG supplies. This is primarily because incumbent suppliers to Europe -- namely Norway and Russia -- are unlikely to cede market share to new entrants such as Qatari LNG.

"How likely is it that Russia or Norway is going to step back and say, 'You know, those Qataris are nice guys...I think we'll just step aside and let them import 4 or 5 Bcf/d and take up all that money that we used to collect,'" Thames said, noting that whatever happens in the European market will be "incredibly important" to the U.S. market.

He predicted that LNG terminals in Europe and those being developed will be used more as a negotiating tool than an import mechanism. For instance, the terminals give the United Kingdom and other countries greater leverage when negotiating for gas supplies with Russia, which could seek access to downstream markets in exchange for providing pipeline gas, Thames said. In the United States it's "a pure economic game; you leave it to traders."

Cheniere recently said it was examining the options for its Sabine Pass terminal, including a possible sale. Asked about this, Thames said management believes Cheniere is undervalued by a market that doesn't see the worth of other projects it has on the boards. Monetizing the Sabine terminal would provide capital for other development, Thames said.

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