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Fracking Goes Global
U.S. Shale Is Transforming the LNG Market

The shale revolution has left the U.S. flush with natural gas, and changed our focus from building facilities to import liquified natural gas (LNG) to the construction of export terminals in just a few short years—no small feat when you consider the cost of these projects runs into the tens of billions of dollars. As these export terminals come online, American LNG will travel by ships around the world, and, as the FT reports, will be sold in a very different manner than what the LNG market is accustomed to:

Up to now, the majority of LNG contracts have been priced over crude oil. But Cheniere plans to use a pricing formula linked to the Henry Hub US natural gas benchmark price, in an example of the weakening hold of the oil-indexed contracts over the market.

Fewer deals may be structured for a long period of time, say a decade or more, as supplies increase and as the price of LNG moves away from being linked to that of oil.

This spot-pricing will help limit the gap in pricing in various regional markets, a development that will especially be welcome in Asia, which over the last four years has paid a significant premium for the liquified hydrocarbon.

Currently shale gas has stayed in the U.S., but analysts predict that in just four years America will account for more than 20 percent of global supplies, bested only by Qatar and Australia. We’re not only flooding the global LNG market, we’re transforming it. That’s yet another sign of the extraordinary transformative power of shale.

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  • Blackbeard

    Now that coal is taken care of the Greens will be going after natgas next. Think Hillary will stand up to them? Not likely.

    The shale gas future you are dreaming about is never going to happen.

    • JR

      I understand your frustration and I even share it. But do you really believe a few nut jobs can stop progress? Call me a foolish optimist, but I believe the answer is that they can not.

      • Blackbeard

        If only it was “a few nut jobs.” The Democratic Party is fully on board. Major donors (Tom Steyer, George Soros, the Ford Foundation, etc.) are fully on board. The academic world is fully on board. Organized science (APS, AGU, the Royal Society, etc.) has abandoned their traditions of skepticism and independent inquiry and now serve as propaganda outlets for the Greens. Individual scientists who speak out are ostracized and intimidated. I struggle to think of another example in history when a great civilization’s elite has embarked on such a self destructive course.

        Of course, in the end they won’t stop progress as you say. But I’m afraid it will be the Chinese and others that make that progress.

      • mikekelley10

        “A few nut jobs”?

        You mean the entire Democrat Party:

        –Massachusetts consumers will pay significantly higher electric bills this winter as a persistent shortage of natural gas for generating plants drives power prices to record levels.

        The cost for a typical household could top $150 a month, based on an announcement this week from one of the state’s two dominant utilities, National Grid. It said its rates will increase by a whopping 37 percent over last winter’s, solelybecause the cost of buying electricity from power plants has soared to the highest level in decades, according to a company spokesman.

        Other utilities, including NStar, are also warning customers to brace for higher electric bills this winter, but they have not determined final rates for the winter.

        “This is pretty bad, and it’s going to really have a bearing on a lot of Massachusetts households’ abilities to just make ends meet this winter,” said John Howat, senior energy analyst at the National Consumer Law Center in Boston.–

        • JR

          Those who stand in the way of progress get crushed by it. Your article illustrates that point magnificently. Because nothing focuses the mind more than being cold in the winter. And if those who are cold in the winter choose not to do anything about it but meekly accept their fate, than this is what they deserve. I’m betting on humanity’s track record of eventually replacing rulers who put their own insatiable vanity above the needs of the many.

          • mikekelley10

            I hope you’re right, but we are so far down the Progressive road I’m not so sure. Our children are being brain-washed to think that Western civilization is what’s wrong with the world, despite all the evidence the other way. Obama types are making energy decisions right now that will haunt us for generations. Once a coal plant is shut down, it will never crank back up. In Britain, they are figuring out how screwed they are and planning to ration power to industry and mobilize back-up power sources to fill in the inevitable gaps in their power production:

            –“The chickens are coming home to roost”. So said the Ukip energy spokesman, commenting on the news that businesses are being asked to join a 1970s style energy rationing program this winter to stop Britain being plunged into darkness. Offices and factories will be offered compensation to shut down for four hours a day so that energy can instead be diverted to households.

            “It is a bitter irony that DECC [the Department of Energy and Climate Change] is planning contracts with commercial companies to use diesel generators to fill the gaps when the wind doesn’t blow. It is bizarre that we are paying over the odds for diesel generators when the plan was to cut emissions.–


          • JR

            We are definitely $#@!$ now. No question about it. But systems that are so contradictory, so divorced from reality don’t last long. They are solid as a rock and then disappear in a flash. No amount of brainwashing can ever make “who are you gonna believe, me or your lying eyes” a cogent long-term solution.
            IF you look at long enough timescales, it is clear that not only is progress happening, not only is it accelerating, it is accelerating non-linearly. Future’s so bring you gotta wear shades. But we have to fight for it. It won’t be just given to us. We are still fracking, still innovating, still proving “PEAK EVERYTHING MAAAAAAAN” crowd wrong again and again. I’m not smart enough to understand the technicals aspect, but smart enough to understand that if lowering the cost of energy has always been a good thing, it is a good thing now as well.

          • mikekelley10

            Lowering energy costs is a wonderful thing for the economy. I remember reading an article a couple years ago that said every recession since WWII except one followed an energy price spike with about 5 months. Affordable energy is the life blood of any modern economy, yet one of the main goals of the political left is to make energy more expensive and harder to get. That’s what destroying perfectly good, scrubbed coal plants and “replacing” them with wind and solar does. It is going to get more and more obvious what a terrible strategy this is, but the plants can not and will not be replaced. Energy decisions made by idiot politicians instead of competent electrical engineers will haunt us for a long time. Luckily, Europe and parts of Canada are even further down this road than we are, so we may still be competitive with them at least.

  • mikekelley10

    So called “green” or “renewable” energy sucks for the consumer and taxpayer, but it satisfies the Sierra Club/NRDC left by making energy more expensive and less reliable. It is also a great way for the left to convert a portion of our utility bills into risk-free, tax-free “investments” for their favorite donors/cronies:

    –If MidAmerican had spent on qualified construction ($236,132,070 ÷ .30) or $787,106,900 during the 2013 fiscal year, they would have generated an investment tax credit of $236,132,070 and this would be in addition to the 2.1 c/KWH production tax credit. When you add these tax credits together they equal the taxes that would be otherwise due on $1,574,000,000. Then, this now would get a total tax-free income of $1,574,000,000.

    After a complicated struggle to extract enough data out of the obfuscated reporting of Berkshire Hathaway 2013 Annual Report, we can project data that is a probable or estimated summary of how Berkshire, Warren Buffett, and its other shareholders could make an enormous amount of money on green wind energy, $1,574,000,000 tax-free.–

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