US approves first natural gas exports

The US approved the first exports of large quantities of natural gas through the Gulf of Mexico, a move that could reduce a domestic glut but raise energy costs for its heavy industry.

The government’s assent will allow a unit of Cheniere Energy to refit a gas import terminal to condense and ship up to 2.2bn cubic feet a day of domestically produced supply to higher-priced foreign markets. The company’s shares rose 31 per cent.

Cheniere’s application was opposed by a manufacturers’ organisation. “For manufacturing, higher natural gas and electricity costs directly impact competitiveness and jobs,” the Industrial Energy Consumers of America said.

The push to export comes since new techniques for drilling shale rock have unlocked an estimated 100 years’ worth of gas supply in the US. Just a few years ago Cheniere and other companies were racing to import liquefied natural gas in the face of looming
shortages.

Gas prices have since tumbled, with benchmark prices now $4 per million British thermal units, down two-thirds from three years ago. US domestic production is now almost 60bn cu ft a day.

Cheniere is the first of three groups to seek permission to export gas from the contiguous US. Macquarie, the Australian bank, has joined with US company Freeport LNG to export as much as 1.4bn cu ft a day via Texas. This month, a joint venture of BG Group and Southern Union requested to ship up to 2bn cu ft a day from Louisiana. The US already exports gas from Alaska.

Before signing off, the Department of Energy was required to find the exports to countries without free trade pacts would not harm the US public. The agency signalled it would not automatically vet the other applications, saying: “The cumulative impact of these export authorisations could pose a threat to the public interest.”

Houston-based Cheniere plans to begin construction next year and exporting gas as soon as 2015. “With the unprecedented growth in unconventional reserves, supply of natural gas continues to outpace demand dramatically,” said Charif Souki, chief executive. “There are currently an estimated 3,500 wells that have been drilled but not completed with the potential to continue to boost production. The U.S. has an opportunity to become a significant supplier in the global energy markets.”

The plan, still under review by the Federal Energy Regulatory Commission, is the first authorisation to export natural gas from the continental US to all US trading partners. The energy department had last September approved Cheniere’s exports to a handful of countries with which the US has free trade agreements.