Exports of domestically sourced liquefied natural gas (LNG) from facilities proposed for the Freeport LNG Terminal on Quintana Island in Texas would be but drops from the U.S. shale natural gas bucket, according to a consultant’s report.
The project’s proposed exports of 1.5 Bcf/d would have a “quite minimal” impact on U.S. gas prices, according to an analysis performed by Altos Management Partners Inc. on behalf of Freeport LNG Expansion LLP and FLNG Liquefaction LLC (collectively FLEX). The analysis was filed by the project backers along with their application for export authorization with the U.S. Department of Energy Office (DOE) of Fossil Energy.
“During the assumed period of export (2015 to 2040), the project exports increased projected Henry Hub prices by $0.03/MMBtu, representing only a 0.5% increase in projected prices,” the Altos analysis found. “Even at the Houston Ship Channel pricing hub, to which the Freeport terminal delivers, the price impact is $0.09/MMBtu, representing only a 1.2% increase in projected prices.
“Projected prices in the large consuming Mid-Atlantic region increased by only 0.2%, a barely perceptible amount.”
Altos found that incremental demand from the proposed exports would represent about 2% of the entire domestic gas market. “…[T]he huge domestic resource base, including unconventional gas supplies such as shale gas and coalbed methane, and conventional gas supplies mitigate the price impact of this relatively small increase in demand.”
The export project was proposed in November (see NGI, Nov. 29, 2010).
“Rather than enter into long-term natural gas supply or LNG export contracts, FLEX contemplates that its business model will be based primarily on liquefaction tolling agreements (LTA), under which individual customers who hold title to natural gas will have the right to deliver that gas to FLEX and receive LNG,” the filing said. “In the current natural gas market, LTAs fulfill the role previously performed by long-term supply contracts in that they provide stable commercial arrangements between companies involved in natural gas services.”
Another export project was proposed previously by Cheniere Energy Partners LP for the Sabine Pass LNG terminal. That project’s backers made a similar argument about abundant U.S. gas supplies in their filing with the DOE (see NGI, Aug. 30, 2010).
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