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Professionally Speaking
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Energy Stat of the Week by Marshall Adkins
Will LNG Exports Rescue the North American Natural Gas Market?
May 21, 2012
It wasn't that long ago - as recently as 2008 - that people were debating whether the U.S. could build enough LNG import infrastructure to fulfill the needs of an undersupplied natural gas market. Now, of course, the problem is the polar opposite: what to do with North America's massive and persistent glut of natural gas. Some solutions are essentially incremental and are visibly materializing, albeit less slowly than gas producers would want. This includes coal-to-gas switching by electric utilities and a rebound in gas-intensive domestic manufacturing (especially petrochemicals and fertilizer). Other solutions are more structural in nature and therefore more distant, such as a surge in natural gas vehicles (which we discussed in our Stat from May 14) and the development of a domestic gas-to-liquids industry (where Sasol is leading the way). In this Stat, we focus on what is probably the most high-profile - and controversial - outlet for excess North American gas. We are referring to the prospect of the U.S. and Canada becoming significant exporters of LNG. The earliest this could materialize would be late 2015, and it's doubtful whether it will truly move the needle vis-à-vis the supply/demand balance before the end of this decade. That said, LNG exports could eventually be a game-changer for the North American gas market, presenting both opportunities and risks for energy investors.
This is a summary of a much more detailed commentary. Please contact your financial advisor for the full report.
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