Natural Gas: Should The US Export It?

| April 7, 2014 | 0 Comments

exporting natural gasAs you may know, there’s been plenty of debate about upcoming US natural gas exports.   Some people are all for it, while others are dead set against it.

And now the topic is getting even more attention thanks to the situation in Ukraine…   

Energy officials from a handful of Eastern European nations were in Washington DC recently, begging lawmakers to speed up the approval of US natural gas export facilities.

If you read my last natural gas article, you know the US has 23 proposed LNG export facilities waiting for approval.  By speeding up the permit process, European countries may be able to get access to US natural gas sooner.

Why do they want it so badly?

Russia has them bent over a barrel… literally.  Countries like the Ukraine and Lithuania get the majority of their natural gas supply from Russia.  And unfortunately, Russia just increased the price Ukrainians must pay for the commodity by 80%.

Why do such a thing?

Because they can.  The Ukraine has very few other options.  In the end, they’ll have to pay the inflated price, or suffer energy shortages.

It’s situations like these that have so many shouting from the rooftops that the US must export its abundant natural gas supply.

Of course, that’s not the only reason…

Companies in the industry stand to make a fortune doing it.  Take Cheniere Energy (LNG) for example.  They’ll be the first company to actually export LNG from the US through their Sabine Pass facility in Louisiana.

Now let’s be clear.  Cheniere has yet to export a drop of LNG from Sabine Pass.  Their facilities won’t be fully operational until 2015.

Yet their stock price has exploded from $3 to just over $55 in recent years- just on the premise they’ll do so.

No doubt about it, there’s big money in exporting natural gas… 

Companies like Cheniere will collect a financial windfall by stuffing super-cooled US natural gas on a boat, sailing it overseas, and selling it at inflated market prices. 

Speaking of which, Asian natural gas prices regularly approach $13-$17 mmBtu.  That’s well above the current $4.50 market price here in the US.

From a global perspective, the financial and humanitarian benefits of exporting US natural gas are many. 

But let’s look at US natural gas exports under a different light for a minute…

Is it in the US’ best interest to send this homegrown commodity overseas?

To get this discussion going, let me ask you a question… 

Do you think the US is currently producing enough natural gas to fulfill its own needs?

As you’re likely aware, the recent shale revolution has unlocked enormous quantities of natural gas under US soil.  Some suggest there’s enough of the commodity to last the US 100 years. 

So given the recent advances, surely the US is producing enough natural gas to at least take care of itself by now, right? 

Wrong.

According to the US Energy Information Administration (EIA), we imported a whopping 2.8 trillion cubic feet of natural gas in 2013!

Even with the shale revolution, the US still imports vast quantities of natural gas via pipeline from Canada and Mexico.  Heck, some is even imported from places like Trinidad and Yemen!

Let that sink in…

Even though the US is still importing natural gas, we’re getting ready to export it to other nations.

How do you feel about that?

We’ll pick up this discussion in upcoming Commodity Trading Research articles.  In the meantime, feel free to voice your opinion.  You can reach me at [email protected], or leave a message in the comment section below!

Until Next Time,

Justin Bennett

Tags: , , ,

Category: Commodity Trading, Natural Gas

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.