Global trade in LNG not tied to long term contracts

Bloomberg:
A cargo of chilled natural gas hauled from Louisiana in late December has become a symbol of how global trade is changing for a fuel increasingly seen as a cheap, cleaner-burning option for countries from Latin America to China and India.

The tanker Maran Gas Achilles passed through the Panama Canal and was headed toward Asia at a speed of 20 knots when, suddenly, it made a sharp u-turn in the Pacific. Next stop: Mexico’s Manzanillo terminal on the southwest coast, where it unloaded.

The abrupt route change shows how the U.S., which began shale gas exports just last year, is creating a new paradigm in an industry that once revolved almost entirely around long-term contracts with set destinations. As the new kid on the block, exporters of U.S. liquefied natural gas -- led by Cheniere Energy Inc. and Royal Dutch Shell SA -- are seeking the best price at any given time. As U.S. exports grow, it’s a strategy that could shift the economics of LNG toward an emerging spot market akin to oil.

“The U.S. puts gas into places on short notice at a good price,” said Jason Feer, head of business intelligence at ship broker Poten & Partners Inc., in a telephone interview. “It’s been flexible. The market’s becoming more short term and the U.S. has been very effective at meeting those needs.”

The U.S. stands to become the world’s third-largest exporter by 2020, when it’s expected to ship about 8.3 billion cubic feet a day of capacity, or 14 percent of the world’s share, according to London-based consultant Energy Aspects Ltd. That growth is a testament to the power of the shale boom of the last decade, helping to reduce the country’s reliance on foreign energy sources.
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There is more.

This is an example of how fracking has changed the market and the US balance of trade picture.   The investment in LNG export facilities appears to be paying off at this time.  It has also made it more difficult for Russian and other gas exporters to extort higher prices.

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