Energy Secretary Ernest Moniz may be new at his job, but he successfully dodged a barrage of questions from the audience and reporters as to when his department would approve more licenses for liquefied natural gas (LNG) exports at the Energy Information Administration’s (EIA) Energy Conference Monday.
The Department of Energy (DOE) will act on as many non-Free Trade Agreement (FTA) applications “as we can responsibly get through” this year, Moniz said. “We will do them in the order as posted” on DOE’s website, he said.
The number of LNG export questions and the relatively high percentage of Asia attendees and reporters from Asian news services among the 1,000 attending the first day of the event in Washington D.C. was an indication of interest stretching beyond U.S. borders.
The price disparity between natural gas in Japan ($16-$18) and the U.S. Henry Hub ($3-$4) has increased the demand for gas in Japan, Wolfgang Moehler, CERA director of global LNG, pointed out, noting that LNG currently accounts for 10% of the global gas market.
The CERA executive Monday quelled industry concerns that shale development in foreign countries could disrupt U.S. LNG exports down the road. “None of these countries will develop [their shale resources] as quickly” as the United States, Moehler said.
Some foreign countries, like China, have major shale resources. But “we don’t expect significant movement on the China unconventional production before 2020,” and thus it poses very little threat to the U.S. LNG export market, he noted. “China’s [shale industry] is still very much in its infancy.”
But, the United States may face other obstacles. “The U.S. [could] actually be one of the first to suffer from an over-supply because others have potentially lower operating costs…for liquefaction,” he told NGI.
So far, DOE has only approved two permits to export LNG to countries with which the United States does not have FTAs — up to 1.4 Bcf/d of LNG from the Freeport LNG Terminal on Quintana Island, TX, for 20 years, and from the Sabine Pass LNG Terminal in Cameron Parish, LA (see Daily GPI, May 20, May 23, 2011).
These “first ones have somewhat of a lower bar” to win approval at DOE, Moehler said. The next permits further down the road will be evaluated “on a cumulative perspective,” meaning that the department will take into consideration the amount of LNG that it has already approved for export to countries to non-FTA countries.
As for the European market, it finds itself in the “quirky aspect” of having to rely on imports because it does not have sufficient storage capacity, said Ira Joseph, executive director of international gas for the PIRA Energy Group. Working gas inventory in Europe is only 60% of the size of the North American market, he noted.
Because of the limited storage, the United Kingdom has to rely on “considerable amounts of imports.” While there has been a disconnect between the Henry Hub and European gas prices since 2009, Joesph expects the prices to become “more closely tied” when North American exports begin
The International Energy Agency projects that two-thirds of U.S. LNG exports will find their way to the Pacific Rim, said Jason Bordoff, director on Global Energy Policy at Columbia University.
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