By Gregory Meyer in New York and Sheila McNulty in Houston
Published: November 21 2010 22:48 | Last updated: November 21 2010 22:48
Macquarieis teaming up with energy company Freeport LNG to export US naturalgas, in a move to gain from a boom in energy supplies fromunconventional sources.
The Australian bank and Freeport LNG planto retrofit a facility on the Gulf of Mexico, originally built to handlegas imports, to condense and ship the fuel abroad.
The project, which could cost up to $2bn, highlights how gas extracted from US shale hasoverturned the country’s import requirements for liquefied natural gas.Just a few years ago, developers were building LNG import terminals tosupplement flagging domestic supplies. There are now 10, with two moreunder construction.
Freeport’s Texas facility opened in 2008 butis operating at less than its 2bn cu ft per day capacity. The projectwith Macquarie would add export capacity of up to 1.4bn cu ft per day.
“There is a much greater demand for US exports than for imports,” said Michael Smith, Freeport chief executive.
The proposal follows a similar move by Cheniere Energy for a combined import and export terminal at Sabine Pass, Louisiana.
Projects, such as Freeport and Sabine, could have repercussions for global LNGmarkets. The shale boom has made the country the world’s biggestnatural gas producer, with 57bn cu ft a day of output, according toNikos Tsafos of PFC Energy, the consultancy. If the US exported just a10th of its gas last year, he says, it would have been the world’s topLNG exporter.
With benchmark US prices at about $4 per millionBritish thermal units, developers see opportunities for selling it inhigher-priced Asian markets.
The Freeport project would require an export licence from the USdepartment of energy. For approval, the department must find that gasexports are in the public interest when they go to countries outside thefree trade pacts with the US, which includes most of Asia.
Nicholas O’Kane, Macquarie’s global head of energy markets, said:“The domestic gas producers in the region around the terminal arepretty excited about the prospect of having another market.”
The developers have begun seeking contracts for 20 years or longer with big gas consumers.
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