" This blog is a integrated approach towards tracking the Indian power sector
which is evolving, having a great potential with prosperous future."



Monday, April 23, 2012

Export of US LNG wins final approval

The first project to export liquefied natural gas from the US in more than 40 years has been given its final approval by the federal energy regulator, clearing the way for construction to start at the site on the coast of Louisiana.

The decision is a potential first step in what could be a profound upheaval in global gas markets, allowing the impact of the US shale gas revolution to be felt in other countries worldwide.

The surge in production made possible by the application of techniques to open up reserves that have traditionally not been commercially viable has sent US natural gas prices plummeting to a ten-year low below $2 per million British thermal units.

That is less than one-seventh the price that LNG cargoes have been selling for in Asia, creating an inviting arbitrage opportunity for anyone able to ship gas from the US.

The $10bn Sabine Pass liquefaction plant planned by Houston-based Cheniere Energy “can be constructed and operated safely and with minimal environmental impacts”, the Federal Energy Regulatory Commission said in a statement on Monday evening.

With the US Department of Energy having already given its approval for Cheniere to export gas from the US to any country not under an embargo, the Ferc decision was the final green light needed by the controversial plan.

The commissioners’ ruling had been expected after Ferc staff made a similar recommendation last year.

However, the project had faced a late flurry of opposition and its sensitive nature may have been reflected in Ferc’s announcement of its decision on Monday evening, ahead of its scheduled date of Thursday.

Charif Souki, co-founder and chief executive of Cheniere, had said he was hopeful that the Ferc commissioners would follow the staff opinion, but he did not want to “jinx” the project by claiming success too soon.

Some energy-consuming businesses have raised concerns that allowing LNG exports could drive up the price of natural gas in the US, eroding the cost advantage that they would otherwise enjoy over international competitors.

Some environmentalists have also objected to awarding a permit for exports, on the grounds that by allowing US gas producers to find new and potentially more lucrative markets for their output, it would encourage greater use of hydraulic fracturing or “fracking”. That process, involving the injection of water, sand and chemicals into the earth at high pressure to crack shale rocks and release the gas, has become increasingly contentious.

Deb Nardone, director of the natural gas reform campaign for the Sierra Club, an environmental group, said in a statement in February: “Liquefied natural gas is not only the dirtiest and most polluting form of gas, but it also requires an increase in fracking, a process we know to be unsafe and dangerous.”

She added: “The industry is pushing forward with these export facilities with their profits in mind, not the families who will bear the burden of increased fracking.”

Several other LNG export projects have also been proposed, but none has yet been awarded general export permits by the energy department or approvals from Ferc.

With all its approvals in place, Cheniere can now start construction on its 200-acre site, which has space to fit four “trains”, the refrigeration units used to cool the gas down to -162°C, at which point it becomes a liquid with 1/600 of the volume of its gaseous state, and can be shipped in tankers.

Sabine Pass was originally built as an LNG import terminal – a sign of how quickly the outlook for natural gas has turned round – and so already has some facilities, such as storage tanks, docks and pipelines, that will be needed for export operations.

Cheniere has already lined up four customers: BG Group of the UK, Gas Natural Fenosa of Spain, Kogas of Korea and Gail of India, to export a total of 16m tonnes of LNG per year, roughly 89 per cent of the plant’s possible maximum capacity if all four trains are built. The company has already committed to proceeding with the first two trains and expects to approve the other two next year.

Cheniere also announced on Monday that it had lined up eight banks to help it raise $4bn in debt to fund the project.

No comments:

Post a Comment