As Mexico’s own natural gas production continues to decline, natural gas exports to the country will likely rise this year and in 2014. This Forbes article provides details:
The headline of a May 21 report in the Oil and Gas Journal reads “Barclays : US gas exports to Mexico will accelerate”. That’s right – natural gas being exported to Mexico, via pipelines, has been a feature of our export picture for many years, since at least the 1930s, per the US Energy Information Agency (EIA).
And we’re not talking about small volumes here. According to the Barclay’s report, natural gas exports to Mexico in 2013 will average 2 BCF per day, and likely rise to about 2.2 BCF per day in 2014, as Mexico’s own natural gas production continues a steady decline.
Guess what else? The U.S. also exports natural gas to Canada, at even higher volumes than we sell into Mexico. Who knew? Well, some of us have known for a long time.
Honestly, this reality is why I have personally found the ongoing debate about the exporting of liquefied natural gas (LNG) to non-contiguous nations overseas, via tankers, more than a little perplexing. It’s not like exporting natural gas is anything new to this country, but to listen to LNG opponents at times, you’d think it was a world changing concept.
The thought that the federal government should artificially restrict the producers of any commodity from moving their product to markets where they exist is in and of itself an odd proposition in what is supposed to be a free market society. But to do so based on little more than the mode of transportation borders on bizarre.
And really, that’s what it boils down to, isn’t it? After all, we haven’t seen policymakers or lobbying groups who oppose LNG exports also advocating we shut down the various natural gas pipelines that ship U.S. gas to Mexico and Canada, have we? If that’s happened, I missed the news reports about it, at any rate.
It’s an odd debate all around, and fortunately, the Obama Administration appears to be slowly but surely getting to the right answer despite all the surrounding noise. The Department of Energy sent a strong signal last Friday when it approved the application of the Freeport LNG Terminal, operated byConocoPhillips . Freeport becomes the second LNG export terminal to receive such approval, the first being the Cheniere Sabine Pass facility in early 2011. So the pace of permitting is painfully slow – as everything seems to be in this Administration – but the ultimate policy decisions turn out right.
Another positive sign that this odd debate may be resolving itself came with the recent statement by the American Chemistry Council that “We support exports of American-made products, including Liquefied Natural Gas, and we oppose imposition of any new LNG export bans or restrictions.” This statement was made in conjunction with the release of an ACC study detailing almost $72 billion in new investments by the US chemicals and plastics industries, investments made possible by the new abundance of shale natural gas in this country.
ACC President Cal Dooley, in announcing the study, had this to say: “Abundant and affordable supply of natural gas has transformed the U.S. chemical industry from the world’s high-cost producer five years ago to among the world’s lowest-cost producers today.” Extraordinary.
One of the concerns often expressed by opponents of LNG exports has been that if we export too much natural gas overseas, it will cause a spike in the gas price. Obviously, that would be a legitimate concern for industries that use natural gas as a feedstock.
But there now appears to be (or we hope there is) a growing realization that there is just so much natural gas capacity in the U.S. that the chances of that scenario happening are remote at best. There is an extraordinary amount of excess producing capacity in the system today in the US, and the exporting of a few BCF per day onto the world market is not going to make much of a dent in it.
What we can hope is that the opening of new markets for U.S. natural gas can help stabilize the price at or slightly above its current level, at which most shale gas wells are economic to drill. That will result in the activation of more natural gas drilling rigs, renewed activity in dry gas plays like the Haynesville Shale, that have gone largely dormant due to extremely low prices, and the creation of thousands more jobs and generation of billions more dollars in royalty payments and state and local tax collections.
The reality is that we are at one of those rare inflection points in our energy history in which we really can do it all with American natural gas. We need to go about the business of taking full advantage of that reality. Speeding up the LNG export permitting approval process would be a very good way to start.
Dr. Ali Ghalambor has authored books that have contributed to the education of students and professionals to accomplish the efficient production of natural gas. Visit this Facebook page for more updates on the industry.