It’s not often that I find myself at odds with an up-and-coming natural gas opportunity in the lower 48 states…
This morning was one of those times.
It’s been two years since my colleague Chris DeHaemer and I have had a row over natural gas. So I guess we were due for a good knock-down, drag-out fight.
(The good news is once the blood starts pumping during these heated debates, a clear winner always emerges: you.)
“You’re absolutely right that U.S. LNG exports could triple by the end of the year,” I told Chris.
And while I have no doubt whatsoever that this will happen, the jagged pill to swallow is that LNG only makes up a trivial 1.7% of our natural gas exports.
To really get shipments of liquefied natural gas off the ground here in the United States (within a few years), we’ll need a rush of development and project approvals to happen.
Suffice to say I’m not popping the champagne just yet…
U.S. LNG: All Flash, No Bang
Truth be told, we haven’t seen the true opposition to LNG exports yet.
Forget the fractivists who have nothing better to do on a weekend than drive their gas guzzlers to protest the hydraulic fracturing used to develop our unconventional tight gas resources. They’re small potatoes compared to the real enemy, who you know as government lobbyists.
I know what you’re thinking — that the oil and natural gas lobbyists inside the Beltway are far too conniving to let the U.S. government put the kibosh on U.S. LNG exports…
You can find that proof in the numbers: Since 1998, the oil and gas industry has spent over $1.4 billion to further their interests. That’s more than $90 million per year!
Not surprisingly, their reasons for wanting more LNG exports is pure greed.
In the latest BP Statistical Review of World Energy 2013, tapping into the Asian LNG market is incredibly more profitable for natural gas companies than keeping their production here (click chart to enlarge).
This time, however, the powerful oil and gas lobbies have a considerable opponent: those who could potentially outspend Big Oil.
Now, who would be in a position to do that?
The answer is other lobbyists — specifically, from electric utilities and the manufacturing industry. Together the two have spent more than $2.9 billion over the last 15 years, more than doubling the amount spent by oil and gas during the same period!
Both groups want our cheap, abundant natural gas resources to stay within U.S. borders. And the question isn’t whether or not they’ll try to exert their influence on Capitol Hill, but rather when they’ll start.
The Utilities Association started making waves more than two years ago, saying that exporting our domestic gas production will wreak havoc on U.S. supply and demand.
And keep in mind the fact that it took years just to get approval for two U.S. LNG export projects.
Canada’s LNG Rush
But hey, there’s always room for negotiation in the burgeoning global LNG trade.
And after all is said and done, the real winner will be the early investors.
It happened with Cheniere Energy, which more doubled for shareholders since last summer. And compared to ConocoPhillips, who owns 50% of the Freeport LNG project, the two LNG plays on U.S. LNG exports are like night and day:
Every time someone reminds me that almost $10 billion is being invested in the newly-approved Freeport LNG project, my reply is the same: “I’ll see your $10 billion — and raise you $20 billion.”
That’s the amount Petronas, Malaysia’s state oil and gas company, is willing to pony up to ensure future LNG shipments from Western Canada.
The Pacific NorthWest LNG project is expected to start sending up to 12 million tonnes of LNG per year by 2019.
In other words, the initial capacity of the Pacific Northwest LNG project will nearly triple that of ConocoPhillips’ Freeport facility. And as if that weren’t enough to draw our attention, there’s enough room for Petronas to tack on an additional six million tonnes of capacity to their total by adding a third LNG train.
To put that into perspective, this one project alone would top both Cheniere’s Sabine Pass and ConocoPhillips’ Freeport projects.
Unfortunately, there’s a slight hiccup, one that could tip the scales in the United States’ favor…
It all revolves around which North American country will be able to supply the LNG facilities about to come online with enough gas to ship overseas.
Next Tuesday, I’ll tell you about a developing situation that could lead to a veritable natural gas crisis. Stay tuned.
Until next time,
Keith Kohl
Check us out on YouTube!A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.
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