An earlier version of this article misstated the location of an Exxon Mobil project to produce liquefied natural gas. It is in Papua New Guinea, not Sri Lanka. This version has been corrected.
COVE POINT, Md. — A vast dock stands a mile offshore here, its concrete legs planted in the water and its steel tentacles poised to suck natural gas in a liquid state from special refrigerated tankers up to a thousand feet long.
But on a recent clear fall afternoon, there wasn’t a tanker in sight. Inside a control room, operator Ron Keraga watched computer monitors that did not blink. The only flurry came from the sea gulls, which perched on the railings outside and then left a white trail behind them.
“Like any job, there’s going to be some downtime,” Keraga said.
In this case, a lot of downtime. Dominion Resources’ Cove Point terminal, originally designed in the 1970s, can import liquefied natural gas — or LNG — from up to 220 tankers a year. But this year only one tanker has unloaded here, back in May.
That’s because the international trade in natural gas — and the rest of the energy business — has been turned upside down. It’s as startling as it would be if rivers decided to run upstream.
As recently as four years ago, energy experts agreed that the United States would need to import LNG to fill the gap between rising U.S. consumption of natural gas and stagnant or diminishing domestic supplies.
But U.S. supplies didn’t diminish or stagnate. Instead, oil and gas companies figured out how to combine horizontal drilling and hydraulic fracturing techniques to tap vast gas reserves trapped in layers of shale rock. And thanks to the surge in shale gas from deposits in places that include Pennsylvania, Texas and Louisiana, the United States is awash with cheap natural gas and could soon turn into a net exporter rather than a net importer.
Now Dominion Resources wants to reverse course. It is seeking permission from federal regulators to build $2 billion of new facilities so that it can export — rather than import — natural gas. Instead of taking liquid from tankers and warming it into natural gas for U.S. consumers, the company would cool and liquefy U.S. natural gas for shipment and sale abroad.
“There has been such a transformation,” said Sen. Ron Wyden (D-Ore.), the likely next chairman of the Senate Energy and Natural Resources Committee. “In my home state, until recently we were having pitched battles over whether to construct import facilities. Fishing folks against environmental folks against landowners. High-decibel stuff. And virtually overnight, we’re not going to have import facilities but export facilities.”
As U.S. supplies have surged, U.S. prices have slumped. Suddenly, producing companies are looking for ways to sell gas abroad, where prices are three to five times as high. And customers are lining up. Japan’s Sumitomo and another Asian buyer have signed long-term agreements to buy LNG from Cove Point; those contracts include guarantees that enable Dominion to line up financing. In Japan, gas prices have run as high as $16 for a thousand cubic feet; in the United States, prices are currently about $3.70. Even after adjusting for the costs of liquefaction and shipping, it’s a good deal for customers like Japan.
“This is a win-win for many people,” said Donald R. Raikes, vice president of marketing for Dominion. “The gas industry is in search of markets, and the price has been pushed down for lack of markets.”
“We have so much gas we don’t know what to do with it, and it’s unlikely that we can create enough demand for all the gas coming on stream,” said Cherif Souki, chief executive of Cheniere Energy, which is spending $10 billion to add LNG export capability to an idle import facility in Sabine Pass, La.
Cheniere has its permit, but Dominion is one of 15 companies that have applications pending at the Energy Department to build export facilities.
Not so fast, Wyden says. He wants to be sure gas exports don’t raise prices and hurt U.S. consumers and manufacturers.
Under current law, the Energy Department must decide whether an LNG gas export operation safeguards domestic needs and meets the public interest, especially for gas going to countries with which the United States does not have a free-trade agreement. Japan is one of those countries.
On Wednesday, the Energy Department released a long-awaited study, carried out by NERA Economic Consulting, that acknowledged exports would raise U.S. gas prices. But it said that in all of the scenarios it modeled, “LNG exports have net economic benefits in spite of higher domestic natural gas prices. This is exactly the outcome that economic theory describes when barriers to trade are removed.”