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Industry Watchers Pick Top U.S. LNG Export Proposals

Market conditions and technology are on target for U.S. natural gas to compete in world markets, and industry watchers are placing their bets on which natural gas export proposals will actually be built and whether the first liquefied natural gas (LNG) exports will leave U.S. shores by 2015 or 2016.

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 Energy'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).

Jack Weixel, client services director with Bentek Energy, said exports could come in the first quarter of 2016 from as many as four U.S. export facilities that Bentek has handicapped as having the best chance of becoming realities: Sabine Pass; Cameron, LA; Freeport, TX; and Cove Point, MD. All of those projects are seeking to build liquefaction facilities and export from locations where they already have import terminals and thus have already been through environmental vetting.

Cheniere Energy last month started construction on its Sabine Pass LNG export terminal (see NGI, Aug. 13). Sempra Global's Cameron LNG LLC is proposing to build an export facility alongside its Louisiana import plant. In late August Freeport LNG filed to add liquefaction and export facilities to its existing LNG import terminal in Brazoria County, TX (see NGI, Sept. 3). Dominion Cove Point LNG has received approval to export to FTA countries, but is awaiting action on its request to access non FTA country markets before proceeding with construction of an export plant alongside its import facilities in Maryland (see NGI, Oct. 17, 2011).

Technology and good old "American ingenuity" that have driven the shale gas boom are also prompting responses to a supply glut that make storage and eventual LNG exports more important than ever, Durkin said. He said he is focused on fracking, storage and exports in the natural gas industry because each of them "has the ability to have an impact on both volatility and prices" in the energy markets.

"Historical market fundamentals still drive gas prices and volatility, but what is new is their influence may be less pronounced," said Durkin, citing recent mild winter and severe summer weather patterns, both of which had relatively mild impacts on prices. "A lot of this is good news for the gas industry." However, more complexity in the gas business, combined with traditional weather impacts, adds to the potential for continued volatility longer term, he said.

This potential for more risk prompted CME to develop new trading products for hedging activities that anticipate the eventual creation of a U.S. LNG export market that take into consideration price spreads between Henry Hub and price points in Europe and Asia. Durkin said CME also is developing new products that anticipate increased regulation in the commodity trading space.

CME Group last Monday launched a broad suite of new natural gas and power contracts that would be listed as futures on CME Globex, the New York Mercantile Exchange trading floor and CME ClearPort, and would be available for trading on CME Direct, a platform offering side-by-side trading and straight-through processing and clearing of exchange-listed and OTC energy markets (see related story).

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