What a difference a decade makes, when it comes to liquefied natural gas.
The U.S. is expected to become one of the top exporters of liquefied natural gas in the next five years, with new export facilities becoming the catalyst for a steady stream of shipments to Asia, according to a Moody’s report issued Wednesday.
The first such domestic export facility, Cheniere Energy’s Sabine Pass Liquefaction in western Louisiana, is expected to come online in 2015.
The impact this increase will have on natural gas prices and markets is mixed.
The increase in exports may impact natural gas prices domestically, as chemical producers and manufacturers that use natural gas as a feedstock will be competing with liquefied natural gas producers. But liquefied natural gas producers in the U.S. are unlikely to face much competition from international producers, because of the higher price internationally for natural gas.
The increase in exports will be a boon to companies like Chesapeake Energy, as it increases the demand for natural gas and will likely push up the price. The forward price for natural gas closed Monday at $4.42 per million British thermal units on the New York Mercantile Exchange.
The arrival of U.S. liquefied natural gas producers is not expected to create sudden shifts in value of international companies investing in this country, because of the long time periods involved. For example, British utility provider Centrica recently agreed to a 20-year, $5.5 billion deal to buy liquefied natural gas from Cheniere Energy at its Sabine Pass facility.
“Since LNG is a slow-moving business dominated by large, highly-rated companies, we do not expect the changing LNG market to be a ratings changer,” Moody’s wrote in its report. “When sales are made, agreements can also last for decades, which helps rating stability.”
Read FuelFix coverage of the debate over exporting U.S. fuel:
- Guest Commentary: It’s time to export US natural gas (Apr. 29)
- Highest-paid workers driving Shell off Australian shores (Apr. 26)
- Guest Commentary: Natural gas exports would halt US manufacturing comeback (Apr. 23)
- Natural gas industry experiencing ‘paradigm shift’ (Apr. 19)
- Skepticism over lower LNG prices (Apr. 18)
- Asian nations eagerly eye cheap US natural gas (Apr. 17)