Friday, 21 October 2016

The U.S. Unleashes the Full Power of Shale

In Oil & Companies News 21/10/2016

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Sometime in 2017, for the first time in 60 years, the U.S. will likely sell more natural gas to the world than it buys. Next year, capacity to export liquefied natural gas from the lower 48 states, chilled to –260F so it can be shipped by tanker, will more than double, to 3.2 billion cubic feet per day. That will add to huge increases in the volume of gas already being piped to Mexico and could boost exports to foreign countries to about 9 percent of total U.S. gas production.
A lot of those new exports will go to Latin America. Since the first LNG tanker left the Louisiana coast in February 2016, 34 cargoes have departed through early October, with two-thirds of them going to Argentina, Brazil, Chile, and Mexico. Colombia will be a new buyer in 2017; the country is on track to begin importing LNG from a new floating regasification vessel by the end of this year. Shipments to Asia are also set to rise as India increases LNG imports amid low prices.
Europe could be in play, too, with the U.S. trying to compete with Russia, which supplies 40 percent of the European Union’s gas imports. Turkey, Russia’s third-biggest buyer, took its first LNG cargo from the U.S. in late September. “The fact that the U.S. is actually exporting, and particularly LNG to places where Russia has almost monopolistic power, is a huge development,” says Majed Limam, a senior consultant for LNG and natural gas at ship brokerage Poten & Partners.
Since it opened in June, the newly expanded Panama Canal is now wide enough for most LNG tankers. China-bound ships may save as much as $3.2 million per round trip by going through Panama instead of the Suez Canal, according to the U.S. Energy Information Administration. A voyage from the U.S. to Japan will be reduced from as much as 34 days to only 20. Instead of needing almost three weeks to go all the way around the southern tip of South America, U.S. LNG tankers headed to Chile can cut through the Panama Canal and get there in about a week, saving more than $2 million per trip.
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Thirty-four shipments of liquefied natural gas (LNG) have been exported from Cheniere Energy’s Sabine Pass terminal in Louisiana, which began operations in February. Most of the shipments have been delivered to Latin America.
Thirty-four shipments of liquefied natural gas (LNG) have been exported from Cheniere Energy’s Sabine Pass terminal in Louisiana, which began operations in February. Most of the shipments have been delivered to Latin America.

By becoming a net exporter of natural gas next year, the U.S. will take a big step toward achieving its own energy independence. The EIA sees total energy exports being balanced with imports sometime between 2020 and 2030. A decade ago, the U.S. was facing a shortage. In 2005 the EIA estimated that LNG imports would reach 12 billion cubic feet a day in 2015. Instead, as exports ramp up, total natural gas imports are down 36 percent this year, to 1.76 trillion cubic feet, from record levels set in 2007.
So far, all the LNG exports are leaving from the Sabine Pass terminal in Louisiana owned by Houston-based Cheniere Energy. The company opened two liquefaction plants in 2016 and plans to add two more next year in Louisiana, making it among the biggest buyers of natural gas in the U.S. Dominion Resources is also scheduled to start its Cove Point plant in Maryland in 2017. Together these plants will be able to liquefy 3.2 billion cubic feet a day, almost as much gas as New York state used per day in 2015. That extra demand could push up prices in 2017, which would make producers happy. Since 2008, natural gas prices have plunged 75 percent and hit a 17-year low this March. Even with big spending cuts and drilling activity at record lows, the U.S. is swimming in gas. Though output is expected to decline slightly this year, the EIA expects it to rebound next year to a record 81 billion cubic feet a day as prices go higher. That means there will be plenty of U.S. supply to fuel the world’s growing demand.


Source: Bloomberg