20-11-2017

Initiative looks to increase US natural gas exports

The US administration is unveiling an initiative to promote natural gas demand and infrastructure in emerging economies to help US LNG exporters.

The administration wants “to make sure that the next gas-fired power plant, the next LNG import facility or the next gas pipeline will be built using American innovation and a ‘made-in-the-USA’ label,” Trade and Development Agency (TDA) acting director Thomas Hardy said today. The agency will expand its partnership with the US natural gas industry to generate new LNG exports through the development of gas-related infrastructure in countries that have LNG import terminals or are considering building one, Hardy said.

The independent agency for decades has been involved in helping LNG infrastructure developers in other countries, counting technical assistance to the 2.9mn t/yr Klaipeda terminal in Lithuania and the 1.5mn t/yr Costa Norte terminal under construction in Panama among its most successful projects.

But the administration is seizing on the agency’s mission to highlight President Donald Trump’s “energy dominance” vision for the US, with strong support for exports of oil, natural gas and coal.

“When it comes to exporting LNG, the US is open for business,” energy undersecretary Mark Menezes said. The administration is working to help foreign customers to get access to abundant US natural gas resources, he said today, at the launch of the initiative at the US Chamber of Commerce in Washington, in cooperation with industry group LNG Allies.

“The future growth of the US oil and gas industry depends on what happens in the emerging markets,” LNG Allies executive director Fred Hutchinson said. “We are demand constrained; we are not supply constrained.”

The TDA earlier this month signed a partnership agreement with Japan’s Ministry of Economy, Trade and Industry (Meti) terminals and other energy infrastructure in southeast Asia and the Pacific region. Another US government agency, the Overseas Private Investment Corporation, is partnering with its counterparts, the Japan Bank for International Cooperation and Nippon Export and Investment Insurance to provide financing and political risk insurance to gas projects.

The economics of LNG trade at present leave little to no profit margin for US deliveries to northeast Asia, following the steep decline in oil prices since mid-2014.

Administration officials — perhaps recognizing the challenge of economics — are pitching US LNG using a different set of arguments.

“US LNG will provide the true security to allies and friends,” Menezes said. “We are a reliable exporter.”

That line of argument is not likely to sway new buyers, Tellurian senior vice president for marketing Amos Hochstein said. “I would not come in and say to Europe, the US LNG is here to save you. It is a competitive market and it is going to remain a competitive market,” said Hochstein, who in 2014-17 served as State Department special energy envoy in former president Barack Obama’s administration.

Hochstein, whose company is developing the 26mn t/yr Driftwood facility in Louisiana, instead suggested presenting LNG as a means to promote a transition to natural gas, away from more carbon-intensive fuels. “Gas is going to be that commodity that can scale up quickly to reach the growing electricity demand globally.”

The administration also sees exports as a means to address large, structural US trade deficits with major LNG importers, including China, India and South Korea. But no new long-term LNG contracts have been signed since President Donald Trump took office. Trump’s recent visit to China resulted in three non-binding deals for Chinese companies to buy US LNG.

“It is a buyers’ market,” Baker Botts partner Thomas Holmberg said. “What the sellers need to do is try to give the buyers the flexibility they are asking for” on the length of contracts and financing.

Source: Argus

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