Written by Sumit Roy |June 23, 2014 Hard Assets
The U.S. will export significant quantities of natural gas by the end of the decade.
Anyone who’s followed the U.S. natural gas market for any length of time is well aware that it is an isolated market.
With the exception of Canada and Mexico, the U.S. does not have the capability to export its natural gas.
Imports are another story. The U.S. has several LNG import terminals, but they’re slowly being converted into export
a consequence of the fact that U.S. natural gas prices are well below those seen around the world. For example, European natural gas prices were last trading around $10/mmbtu, while those in Japan were at $16.
Compare that with the U.S. benchmark futures contract at $4.50. Clearly, there’s money to be made shipping cheap
U.S. natural gas into higher-priced markets.
Source: Cheniere Energy
That’s what companies
such as Cheniere Energy plan to do. Cheniere has been leading the charge in the U.S. push to export natural gas. The company, which owned several money-losing import facilities, is in the process of converting those facilities into export facilities. In the pre-shale-boom period several years ago, when it seemed like the U.S. would actually run out of natural gas, import facilities
which convert liquefied natural gas back into gas
seemed like a good idea. Now that the U.S. has more natural gas than it knows what to do with, Cheniere is turning those facilities into liquefaction terminals, which convert natural gas into liquefied natural gas. That will allow LNG to be shipped around the world to higher-priced markets.