In February of this year, the first cargo of American liquefied natural gas (LNG) left Cheniere Energy's Sabine Pass, Louisiana terminal headed for Brazil. Last month, nine ships filled with LNG left the Cheniere facility. Argentina, India, Chile, Spain, Jordan and even the United Arab Emirates and Kuwait have received shipments of American LNG over the past year.
This is all good news for the U.S. economy and our booming natural gas industry that, thanks to the shale revolution, has made us the world's No. 1 producer.
According to the U.S. Department of Energy, America is now a net exporter of natural gas and will become the world's third largest exporter of LNG by 2020, a dramatic reversal from a decade ago when we were building facilities to import gas in response to a perceived shortage of domestic supply.
But we've just begun to exploit the world market for LNG. Last year, an average 41 billion cubic feet of LNG was traded globally each day, the highest amount ever. This volume is projected to grow steadily as more natural gas is substituted for coal in power generation, in part to meet commitments by most countries to significantly reduce greenhouse gas emissions in the years ahead.
U.S. exports of LNG so far this year amount to less than one-tenth of 1% of total world shipments. Luckily, at a current average price of about $2.70 per thousand cubic feet (mcf), American gas is the world's cheapest. Even adding in liquefaction and transportation costs, our LNG can still beat average landed prices of $5.53 in Japan and Korea, $4.46 in the United Kingdom, and $4.41 in the Baltic region.
Unfortunately, our capacity to export is severely limited due to regulatory bottlenecks. Though an additional four export terminals are currently under construction, more than two dozen other applications are pending before the U.S. Department of Energy with half submitted before 2015. Regulatory hurdles are particularly onerous for projects that would send gas to non-Free Trade Agreement countries. In the meantime, other countries are beefing up their LNG export capacity, most notably Indonesia and Australia who are much closer to the huge Asian market.
If the U.S. is to become a major competitor in the global gas market, we have to streamline and expedite approvals of LNG export projects. Legislation to accomplish this has been languishing in Congress for several years; but with a pro-energy president taking office in January, and a Congress of the same party, the prospects for expediting the permitting process should improve markedly.
In addition to the obvious economic benefits to our domestic energy sector, increasing LNG exports can bring strategic advantages as well. At present, Russia is providing most of the gas to Eastern Europe and the Baltic nations and, from time to time, restricts supplies to exert political pressure, as with suspensions of gas deliveries to Ukraine for several months in 2014 and again in 2015. By selling more American gas into these markets, we can help break Gazprom's near monopoly.
To this end, the ambassadors of the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland and Slovakia recently sent a letter to congressional leaders urging action to accelerate LNG exports. In their letter, they point out that new import terminals have been opened in Lithuania and Poland that can facilitate deliveries not only to the Baltic States and Poland but also to Ukraine and Southern Europe through cross-border pipelines.
In short, removing the constraints on exports of liquefied natural gas will not only improve the energy security of some of our key allies, it will also reduce Russia's bargaining power in Europe and further stimulate our own economy.
Source: http://www.investors.com/