As far as gas supplies, Souki said that “we’re never going to have a problem . . .There are new discoveries almost every month.” Even though natural gas prices are low, he said, supply is still growing because oil prices are high, and when companies look for oil they usually find gas, too. Hence, in places like North Dakota, large volumes of natural gas are being flared until pipeline infrastructure can be built.
Key members of energy committees in Congress are urging the Obama administration to exercise caution before issuing permits. “I’ve tried to say, ‘Let’s just step back here for a minute and think through the implications,’ ” Wyden said.
Wyden considers himself a free-trade Democrat, but he views energy as a separate issue.
“I believe you ought to grow things in America and that you’ve got to add value to things in America, and ought to ship them somewhere,” he said. “But I also think that when you’re talking about strategic national assets, which is what I think you have with natural gas, you should look before you leap.”
The International Energy Agency forecasts that U.S. domestic prices will rise to $5.50 a thousand cubic feet by 2020, primarily because of growing domestic demand. With the high cost of liquefaction and shipping, LNG exports from the United States aren’t a sure bet.
“This notion that LNG exports are a no-brainer is just not true,” said Robin West, chairman of the Washington-based consulting firm PFC Energy and a former Cheniere board member, who expects that only a few export terminals will be built. “This fear that there’s going to be this great big sucking sound for U.S. LNG and that [exports] will drive up U.S. costs is highly unlikely.”
Even if they’re not exported, the deep U.S. natural gas reserves have rocked the global market, squeezing out many big LNG exporters who had planned to ship here.
Qatar, the world’s largest LNG exporter with the world’s biggest LNG tanker fleet, had counted on the U.S. market. In its 2007 annual report, Exxon Mobil said that Qatar was building an export facility capable of shipping 1 billion cubic feet a day just for the U.S. market. In Texas, Qatar Petroleum took a 70 percent stake and Exxon Mobil a minority stake in the Golden Pass terminal, with a capacity to import 2 billion cubic feet a day, primarily from Qatar. Now the terminal is idle, and Golden Pass is asking the Energy Department to permit a $10 billion conversion to exports.
Qatar and other gas-rich countries — which only four years ago talked about forming a cartel modeled on OPEC — need to find new homes for their shipments. And they’re doing that at a time whengas demand in Europe is collapsing, falling 9 percent below the levels of 2009, at the depths of the Great Recession.
Asia remains a major destination — and has kept global gas prices high. Demand in China is growing steadily, and its current five-year plan calls for expanding gas use. And Japan’s appetite for LNG soared after it closed its nuclear plants in the wake of the tsunami that destroyed the Fukushima Daiichi nuclear complex. With new supplies coming online, however, even Japanese companies have been pressing to link their payments to the low spot price for U.S. natural gas at Louisiana’s Henry Hub, the U.S. benchmark.
The decline in Europe has put pressure on Russia and its state-owned gas monopoly, Gazprom.
Russian gas pipelines — built in Soviet days — are still the principal suppliers to Europe. When built, they were criticized by President Ronald Reagan, who said they would allow the Soviet Union to blackmail Western Europe. In recent years, strategists and companies have worked to diversify supplies by building new pipelines from the Caspian Sea through Turkey. And Poland, heavily dependent on Russian gas, has been trying — albeit with disappointing results — to tap its own shale deposits.
But Europe is now adding LNG importing facilities. Just as important, it has recently used cheap U.S. coal for electricity generation. That coal, displaced by cheap U.S. natural gas, is replacing expensive Russian gas. Gazprom’s share of European gas imports has dropped from half a decade ago to about a third. In response, Russia has renegotiated gas contracts — previously linked to the price of oil — and reduced prices to Germany, Italy and Poland. Gazprom also has told some independent Russian gas producers that it would no longer guarantee the same level of purchases. Russia’s gas exports will drop 4 to 5 percent this year, Energy Minister Alexander Novak, according to the newsletter Petroleum Argus.
“The United States gave a gift to European importers, deliberately or not,” said Fatih Birol, chief economist of the International Energy Agency. “It is making importers’ hands stronger.”