Report Warns of Narrowing Window for LNG Exports

A report circulated by Sen. Lisa Murkowski (R-Alaska), ranking member of the Senate Committee on Energy and Natural Resources, warns the U.S. could miss its window to become a major player in global natural gas trade.

The white paper titled “The Narrowing Window: America’s Opportunity to Join the Global Gas Trade,” part of the senator’s Energy 20/20 policy blueprint, suggests the federal government should swiftly process pending applications to export liquefied natural gas (LNG) to non-free trade agreement (FTA) countries.

“The window for the United States to join the global gas trade will not be open indefinitely,” the report says. “In fact, it is narrowing, and there is a real possibility that the nation will miss out on a historic opportunity.”

The report was released on Aug. 6, just as several bicameral Democrats called for a “thorough” Department of Energy (DOE) review of how a surge in natural gas exports could affect climate change.

But the white paper argues that the combination of three factors—”a vast domestic resource base, production outpacing demand (leading to a surplus), and a burgeoning global market”–presents the U.S. with a unique opportunity to increase its exports of natural gas. But as global gas demand surges, several other countries are also working to tap the world’s enormous natural gas resources. Meanwhile, a global gas market is developing to facilitate a rapid increase in both supply and demand of natural gas, primarily via pipeline.

“At present, relatively few countries are able to participate in the LNG trade,” the paper says. LNG export leaders, ranked in descending order, include Qatar, Malaysia, Australia, Nigeria, Indonesia, Algeria, Oman, Brunei, the United Arab Emirates, and Yemen. Japan and South Korea, alone, account for half of the world’s LNG imports.

However, it is “costly to liquefy natural gas and load it onto tankers. Export facilities also take years to construct and typically entail contracts with importing customers that span decades. Expensive infrastructure to convert LNG back into gaseous form is also a limitation on market participants,” the paper acknowledges.

In the U.S., in order to export natural gas, a project must apply for authorization from the DOE. Exports to FTA countries are automatically approved, but exports to non-FTA countries require a review. Though it is weighing roughly 20 industry applications, the agency has only permitted three facilities to export LNG to non-FTA countries to date.

The DOE conditionally approved Sabine Pass Liquefaction’s application two years ago, and this May, the agency conditionally approved an application by Freeport LNG Expansion. On Aug. 7, the day after the report’s release, the DOE conditionally approved Lake Charles Exports’ application.

The Federal Energy Regulatory Commission (FERC) is also mandated to permit onshore LNG terminals, which includes conducting an environmental review in accordance with the National Environmental Policy Act. The Department of Transportation’s Maritime Administration is also mandated to license each offshore LNG terminal.

“Other nations will be competing for long-term contracts, which are important for export approvals and necessary for securing long-term financing,” the report warned. “Delays in permitting, problems with construction, lack of financing, environmental and special interest opposition, and other issues can all negatively impact the feasibility of export facilities. We in government should do what we can to help alleviate those problems.”

Sources: POWERnews, Sen. Lisa Murkowski, Committee on Energy and Commerce

Sonal Patel, Senior Writer (@POWERmagazine, @sonalcpatel)

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