US shale gas roils world LNG markets

Bloomberg/Fuel Fix:
Shale drillers from Pennsylvania to Texas flooded the U.S. with so much natural gas over the past decade that prices slid to a 17-year low. Now they’re going global, with the potential to upset markets from London to Tokyo.

The U.S. began shale gas exports by sea this year and is projected by the International Energy Agency to become the world’s third-largest liquefied natural gas supplier in five years. Gas will challenge coal at European power plants and become affordable in emerging markets, where prices have been high and supplies limited, according to the IEA and Goldman Sachs Group Inc.

LNG became the world’s second most traded commodity after oil last year and demand will keep growing, Goldman said. U.S. gas is adding to the global glut triggered by new Australian supply and weakening Asian consumption. Shale is having an outsized impact on how LNG is sold, prompting spot trading in lieu of long-term contracts.

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“The U.S. clearly changed the picture,” Costanza Jacazio, a senior gas analyst with the Paris-based IEA, said in a phone interview. “It’s going basically from zero to the third-largest LNG capacity holder in the space of five years and it brings a new flexible dimension to the LNG market.”

With supplies growing, some Asian nations like Japan are contracted to buy more than they can consume, leaving surpluses to be sold. That’s lured major traders into the LNG market in recent years, including Vitol Group, Trafigura Group, Koch Industries, Gunvor Group and Noble Group, the IEA said.

The annual capacity of liquefaction plants, where gas is chilled and compressed for shipping, grew to 415 billion cubic meters in 2015 and will expand to 595 billion by 2021, according to the energy agency.

Cheniere Energy has sent 19 tankers of the liquefied gas abroad from its Sabine Pass terminal in Louisiana. By 2020, five terminals will be operating on the U.S. Gulf Coast and in Maryland. Global export capacity will surge 45 percent and the U.S.’s share will jump to 14 percent from nothing, according to Energy Aspects Ltd.
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There is much more.

While much of the current activity is in Asia, I think Europe has the potential to be a big purchaser of LNG to offset the sometimes extortionate price of Russian gas.  The LNG from the US also has the potential to be much more dependable.

LNG also has the potential to lower carbon emissions, although Big Green still opposes it.  It should also help the US with its trade balance.

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