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U.S. LNG Exports Seen as High as 5.4 Bcf/d in 2020

Bentek Energy LLC said in a new research note that exports of liquefied natural gas (LNG) from the United States will be allowed and could reach as high as 5.4 Bcf/d by 2020, and another 1.4 Bcf/d could be exported from Canada.

"While LNG exports will lead to higher gas prices, U.S. producers are expected to ramp up drilling and production to a level sufficient to accommodate domestic demand growth and exports," the firm said. "The productivity of U.S. unconventional plays also creates a significant risk that U.S. gas production could end up being much higher than the current forecast."

By Bentek's count, 19 LNG export projects have been announced in the United States and Canada that combined would provide more than 24 Bcf/d of export capacity if all were constructed. Six of the projects, including four in the United States, are expected to be in service by the end of 2020, providing about 7.8 Bcf/d of export capacity, Bentek said.

Exports will increase gas demand and prices at home Bentek said. "While the U.S. and Canada possess large gas resources, gas-directed drilling has declined to 10-year lows because of weak gas prices and more attractive prices for oil and natural gas liquids. Meanwhile, low gas prices also have prompted demand increases in the power sector," the firm said.

Bentek LNG analyst Javier Diaz told NGI Henry Hub prices in 2020 would be 20% higher with exports than they would be if there were no export projects.

Power burn of natural gas is up 22% this year to date, Bentek said. "The combination of these factors is expected to result in a tightening supply-demand balance at a time when LNG exports are being considered."

North American export projects will face increasing competition with other new supply sources, particularly those in Australia, Bentek said. Seven LNG supply projects are being planned in Australia between now and 2020. In total, there are more than 50 LNG supply projects worldwide that are being considered for service through 2020, more than 30 of which are viable projects representing in excess of 35 Bcf/d of potential capacity, Bentek said.

Early U.S. entrants into the LNG export game stand the best chances of success, Bentek said. "The projects that take longer to begin service are expected to face increasing competition in a market that will move from being short supply in 2012 to long supply by 2020." U.S. liquefaction and export projects most likely to get built (and when), according to Bentek, are Sabine Pass (by 1Q2016), Cameron LNG (3Q2017), Freeport LNG (4Q2017) and Cove Point (2Q2018). The most likely Canadian terminals are Douglas Channel LNG (4Q2014) and Kitimat LNG (4Q2017).

CME Group COO Bryan Durkin told an LDC Forum audience in Chicago last week that he thinks sub-$3/MMBtu gas prices create "an opportunity [globally] for American energy." Now that Cheniere's Sabine Pass export project is under development, Durkin said the first U.S. LNG exports "could come as early as 2015" (see related story).

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