US election results likely to limit new LNG projects to two, three: Macquaire
Houston (Platts)--8Nov2012/1253 pm EST/1753 GMT
With Tuesday's re-election of US President Barack Obama and the
Democrats keeping control of the Senate, LNG exports from the US' Lower-48
states will likely be limited to the gas equivalent of 4-6 Bcf/d, Macquarie
Securities Group oil and gas strategist Vikas Dwivedi said late Wednesday.
"With this election, I think we're still going to be OK with two to three
[export projects], but going far above that gets a little tougher," Dwivedi
said during a presentation by Macquarie's energy markets division in Houston.
Dwivedi did not specify why he thought Tuesday's elections results would
make it more difficult to export greater quantities of LNG out of the US, but
some industry observers have said that a Republican administration might have
been more welcoming to a market-based approach in determining how much LNG
the US could export.
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Dwivedi said that based on preliminary indications from the US
Department of Energy, the agency seems to believe US LNG imports should not
exceed 10% of domestic production, which is now in the range of 60-70 Bcf/d.
"That means the maximum level of LNG exports would be 6-7 Bcf/d," he
said. "Above that, it will get tough politically."
Although there are some industry concerns that the likelihood US Senator
Ron Wyden, an Oregon Democrat, would take over as chairman of the Senate
Committee on Energy and Natural Resources in January could make it difficult
for US projects to export LNG, Dwivedi said Wyden "has been generally a
moderate, and, so far, he hasn't shown anything worrisome."
However, he cautioned that "some say once [Wyden] gets in his seat, he
will show his true colors."
In the Senate, Wyden, 62, has expressed concerns that large-scale LNG
exports would raise domestic gas prices and hurt the US economy. This spring,
he said at a public event in Washington that the US government should impose a
"timeout" on approving LNG exports until their effects can be better gauged.
Last week, Wyden wrote to US Energy Secretary Steven Chu asking him to
explain the "decision-making criteria" that the DOE would use to determine
whether to approve all "pending and future applications" to export LNG.
The DOE is required to quickly approve export applications to countries
that have a free-trade agreement with the US, as long as the gas is given
so-called national treatment in such agreements. But the DOE is required to
determine if LNG exports to countries that do not have FTAs would be in the
US' interests, and some of the world's major LNG markets, including the top
market of Japan, do not have FTAs with the US.
DOE has said it is awaiting a highly anticipated report examining the
potential impacts of US LNG exports on the domestic market before deciding
how much LNG could be exported to non-FTA countries. Many industry experts
expect a decision late this year.
Dwivedi declined to comment on which proposed export projects likely
would be built. Only one of the proposed export projects in the Lower-48
states is in the construction phase -- Cheniere Energy's Sabine Pass project
in Louisiana. It is the only project to have received export licenses to FTA
and non-FTA countries, before DOE said it would hold off on further non-FTA
decisions until analyzing the potential cumulative impacts of US exports on
the domestic market.
Australia-based bank Macquarie previously had a partnership to market LNG
exports from the planned Freeport LNG project in Texas, but that partnership
was dissolved. Macquaire and Freeport officials have declined to comment on
the matter. Some industry experts, however, have said it was easier for
Freeport LNG to enter into long-term capacity agreements with industry
heavyweights, rather than Macquarie trying to market supplies. They also said
the project may have become less attractive to Macquaire because of rising
Freeport LNG has signed 20-year agreements with Japan's Osaka Gas and
Chubu Electric for all the 4.4 million mt/year (equivalent to 563,000 Mcf/d
of gas) of capacity from the proposed first train, and has preliminary
agreements with Shell for that company to acquire all the capacity on
proposed second and third trains.
Nicholas O'Kane, Macquarie's global head of energy markets, said at the
same presentation that Macquaire still is serving as a financial adviser to
He added that Macquarie, which has some capacity rights at the existing
Freeport LNG import facility, is still eying growing its LNG business.
"We are looking at various opportunities for offtake," he said,
declining to elaborate.
--Ron Nissimov, firstname.lastname@example.org
--Edited by Carla Bass, email@example.com