The U.S. is all set to double its shale gas exports. Following the first round of exports in February, Cheniere Energy Inc. – the nation’s first and only exporter of shale gas – has received the nod from authorities to supply liquefied natural gas (LNG) from a second plant (Train 2) at Louisiana’s Sabine Pass terminal.
In 2015, shale gas accounted for around half of America’s natural gas output. Shale gas production could double to reach 79 billion cubic feet per day – about 70% of the nation’s natural gas production – by 2040, according to reference case estimates from EIA.
Source: EIA
Moreover, the U.S. will edge past many other producers in LNG capacity additions in the coming years, as EIA estimates suggest.
Source: EIA
Will that add to the supply glut, or does it spell more opportunities for the nation? Between 2012 and 2024, while the U.S. is expected to have a +16% growth (or, 51% of the OECD Americas’ total increase) in natural gas consumption, the country’s production – the largest in the OECD – is projected to climb at a much faster pace: +47%, largely on the back of shale gas production. That could spell opportunities for U.S. exports’ expansion, especially with demand projected to rise by +26% in the whole of OECD Americas, and by +70% globally.
Source: EIA
Source: OECD
Source: EIA
Thanks to the shale revolution, the U.S. could become a net exporter of natural gas in the next couple of years – after having been a net buyer for a long time in the world market.
Source: EIA
By next year, liquefied natural gas (LNG) export capacity from the lower 48 states is projected to more than double to 3.2 billion cubic feet per day.
Already, around 34 LNG carriers have departed the Sabine Pass terminal this year, most of which supplied gas to Argentina, Brazil, Chile and Mexico. Shipments to India and Columbia are also expected to gain momentum soon.
U.S. could also be giving players like Russia some serious competition. Turkey, Russia’s third largest buyer, took its first LNG shipment from the U.S. in September.
Furthermore, with expected increases in global gas prices over next year, U.S. capacity additions could translate into gains for suppliers – something that should induce more production.
Source: EIA
Bottom Line for Investors
The surge in U.S. gas exports raises anticipations about an already glutted market. Nevertheless, forecasts point to global demand growth, and gas price rebound may already be underway – meaning, U.S. gas exporters’ investments could reap substantial returns over time. Cheniere already has two plants (each with a capacity of producing equivalent of 650 million cubic feet per day) and is planning to set up two more next year. Cheniere will reportedly get paid fixed amounts irrespective of whether its customers eventually take any LNG from the terminal.
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