Energy secretary calls for review of US natural gas exports
Ernest Moniz was officially sworn in as secretary of the Department of Energy Tuesday and called for a further review of the proposals before making any final decisions on liquefied natural gas exports. This has somewhat dampened the momentum following the Department of Energy鈥檚 (DOE) decision last Friday to conditionally approve a Texas liquefied natural gas export project, Alic writes.
The Excelsior arrives at the Freeport LNG (Liquid Natural Gas) terminal in Houston. We are most likely to see more natural gas export approvals this year, and beyond, Alic writes, but it鈥檚 not going to be a sudden opening of the market.
Steve Campbell/Houston Chronicle/AP/File
While the hints over the past weeks have favored expanded US natural gas exports, the confirmation of Energy Security Ernest Moniz has delayed a final decision on the process, with 19 export applications on hold for more in-depth review.
This has somewhat dampened the momentum following the Department of Energy鈥檚 (DOE) decision last Friday to conditionally approve a听
Then听on Tuesday, Moniz was officially sworn in and called for a further review of the proposals before making any final decisions. The review he鈥檚 waiting for concerns the potential impact expanded exports would have on domestic natural gas supplies and prices. The question Moniz poses is whether the existing impact study finished last year uses data that is too old.听 That study, courtesy of the DOE, established that even in the event of higher domestic prices, natural gas exports would be economically beneficial to the country.听
In the meantime, let鈥檚 get back to Friday鈥檚 momentum, which resulted in a听听for the Freeport LNG Terminal on Quintana Island, Texas. Freeport would be allowed to export up to 1.4 billion cubic feet a day of natural gas to countries without a free-trade agreement (FTA) with the US, for 20 years. Export deals have already signed with Japan鈥檚 Osaka Gas and Chubu Electric Power, and with BP Plc.听(Related Article:听)
Freeport LNG Expansion, L.P. is a wholly owned subsidiary of Freeport LNG Development, L.P. It has four limited partners: Freeport LNG Investments, LLLP, an entity owned by Michael S. Smith; ZHA FLNG Purchaser, LLC, a wholly owned subsidiary of Zachry American Infrastructure, LLC; Texas LNG Holdings, LLC, a wholly owned subsidiary of The Dow Chemical Company; and Turbo LNG, LLC, a wholly owned subsidiary of Osaka Gas Co., Ltd.听听
Freeport isn鈥檛 out the woods yet, though: It still needs approval from the Federal Regulatory Commission (FERC).
The听听responded immediately to the DOE鈥檚 conditional approval of Freeport exports, with natural gas prices rising 5% on the previous week.
Freeport is the second export project to win approval from the DOE. The first was over 2 years ago when the DOE approved natural gas exports with non-FTA countries from the Cheniere Energy-owned Sabine Pass LNG Terminal in Cameron Parish, Louisiana.
For investors, the momentum is going in the right direction, despite Moniz鈥檚 call for further review.
And foreign companies are rushing to get in on this, hoping to get their hands on cheap US natural gas. There is a lot at stake, and investors are hedging their bets that more projects will be approved in the near future.
The DOE鈥檚听Friday听approval of Freemont was enough for three other foreign companies to agree to invest $7 billion on听听in Louisiana鈥攊n Hackberry--that hasn鈥檛 yet won non-FTA export approval.听(Related Article:听)
A final investment decision on the part of Japan鈥檚 Mitsui and Mitsubishi and France鈥檚 GDF Suez will of course depend on export approval. If they get approval, they are听to launch exports.
If the deal goes through, the two Japanese companies will each acquire a 16.6% equity stake, and Sempra will hold on to a majority 50.2% ownership.
The bottom line here is that we are most likely to see more export approvals this year, and beyond, but it鈥檚 not going to be a sudden opening of the market.听听is under pressure by some critics, including Senate Energy Committee Chairman Ron Wyden (D-Oregon), that last year鈥檚 DOE study used outdated data to make unrealistic market assumptions.
The听听from the Energy Department, as hinted by acting assistant secretary for fossil energy Christopher Smith, is that the Obama administration could issue licenses for natural gas exports every two months.
Original article:听