The United States likely will get into the LNG exporting business, but the benefits may not be as big as currently anticipated, the managing director of Pace Global said Jan. 16.

Speaking at Platts' Gas Storage Outlook conference in Houston, James Diemer said the U.S. has a number of advantages over other countries that will make it somewhat easier for it to export LNG, including past history of building major oil and gas projects.

"We have a reputation here in the Gulf Coast that we know how to develop infrastructure. The politicians and regulatory authorities are supportive in a way that has a reasonable balance between the public interest and the interests of the developers and the industry," he said.

While Diemer gave credit to state and federal regulatory bodies in general, he said the Obama administration's stance on LNG exports has the potential to cause problems. With a sluggish economy and a sometimes difficult relationship with the industry, he said, the current administration could move at a pace that could cause some projects to miss their window of opportunity.

"It's going to come down to politics - even though it shouldn't come down to politics," Diemer said. "My expectation is there will be more [LNG export facility] approvals, but as in other activities in this administration, they will go very slowly and very carefully and use whatever authority they can to drag their feet ... so prices in the U.S. remain a bit depressed and help the economy out."

The slow pace could mean the current high demand cycle could be over by the time some of the proposed LNG export facilities are ready to go online.

"Not all of these projects will proceed," Diemer said, noting the slow pace of regulatory approvals and large capital costs associated with LNG export facilities. "There could be a lot of volumes coming out of here, but it will take a lot of time. It's a 10- to 15-year period, and during that period unconventional resources could be developed in other countries."

Part of that development could come as a result of Asian companies investing in U.S. unconventional plays.

"They're here for the long haul," Diemer said of major players from the Far East. "They're not interested in the terminals themselves; they're buying into upstream. They want shale technology. That may be the ultimate weapon in negotiating LNG exports."

On the positive side of the equation, Diemer said he still believes the U.S. could export between 3 Bcf/d and 5 Bcf/d of LNG, which could help stabilize the U.S. market.

"These LNG exports are going to tighten the U.S. supply/demand balance. I think everyone understands that when you open up a market to supply here in the U.S. ... there will be some tightening," he said. "I think that could be beneficial because the swing in U.S. markets [will be reduced]. The floor won't be as low and won't be as protracted."

 

 


Copyright 2013 SNL Financial LC. All Rights Reserved.

(Originally published Jan. 18, 2013, in SNL Daily Gas Report.)