Its sounds a bit ironic that the US – largest consumer of energy in the world – would be exporting affordable low carbon energy to China. That is exactly what a Houston-based subsiduary of Cheniere Energy Inc. is planning to do when it announced it is working on a deal to export liquefied natural gas (“LNG”) from Louisiana to one of China’s largest independently owned natural gas companies.
Cheniere bills itself as “North America’s LNG Gateway” and like other LNG facilities in North America, they were orginally intended to import LNG from natural gas suppliers like Quatar. However, with the boom in natural gas production due to shale gas these LNG facilities are looking to now export natural gas to China and other countries in Asia.
The financial model is quite compelling. Demand for natural gas in Asia is increasing and most Asian contracts are price-pegged to oil. That means that natural gas bought in Louisiana for ~$4 can be sold in China for nearly three times as much or $12. Providing enough margin to cover the processing and shipping to Asia.
Exporting US natural gas is nothing new. Alaska has been exporting natural gas to Japan for years. And many Americans that read the recent story in the Wall Street Journal, may think its a positive economic opportunity to finally be selling and exporting gas rather then importing it when in fact it is a lost opportunity.
The US is still the largest consumer of energy in the world – more specifically – it is the largest consumer of oil in the world. And a good portion of this oil is imported from some countries in the Middle East that use the profits from oil sales to pay for political movements that oppose the US. As T. Boone Pickens once said about the Iraq war when he stated “we’re financing both sides”.
HRN has continually pointed out that North America needs to leverage natural gas to its full benefit. Its abundant, affordable and cleaner then oil and coal. In the US, T. Boone Pickens has been tiredlessly lobbying to use more natural gas in the country’s transportation network, and less oil derived products like gasoline and diesel. His main point is that buying oil from the Middle East is a massive-cost to the American economy, and the US dependency (or as some may say “addiction”) to oil is not sustainable. Natural gas offers a domestic lower cost alternative. (President Barack Obama really needs to revisit the Pickens’ Plan)
The lower carbon advantage that natural gas offers should not be over looked. Though US and global economies have taken front page headlines, the issue of climate change is not going away. The lower carbon footprint of natural gas is not only better for the ecnvironmnet, but offers a potential competitive advantage to Canada and the United States if and when the international community agrees to a carbon tax. The end result is that those countries that can produce and distribute products and services in a lower carbon economy will have an advantage over higher carbon producers.
The bottom line here is that Canada and the US need to use more natural gas in transportation and power generation before they export the benefits and advantages of natural gas overseas. This does not mean stop the export plans that are underway. Its a free-economy. Just use more before its too late and the opportunity is lost.
Wall Street Journal: Firm Would Export U.S. Natural Gas to China