America’s very first cargo of LNG exports is being loaded onto a tanker at a Louisiana terminal today, and the tanker that will be transporting that superchilled hydrocarbon will itself be escorted by a fleet of custom tugboats that were initially commissioned to lead tankers bringing in shipments from abroad. Bloomberg reports:
Ready to steer the giant tanker [that will carry America’s first LNG export shipment] into Cheniere Energy Inc.’s $15 billion Sabine Pass terminal is a fleet of tugboats that’s spent the past seven years killing time — some days holding emergency exercises, some days racing each other. They were all set to escort shipments of natural-gas imports, but the ships never arrived: unexpectedly, the U.S. started producing enough gas of its own.
“The boats are beautiful — you could eat off the floor in the engine room,” said Richard Ennis, head of natural resources at ING Capital. With the switch to exports, the tugs will at last have a job to do — even if it’s not the one they expected. They “may actually get a scratch on them,” Ennis said.
The story of America’s about-face from seeking out LNG imports to now exporting that same commodity just a decade later is full of details like this. For example, back in 2003, a group of energy majors came together to fund a $2 billion LNG import terminal in Sabine Pass just a few miles from the Cheniere facility loading our first exports this week. These import terminals were, just like the port’s tugboat fleet, made idle by the shale boom, which slaked America’s thirst for natural gas.
But export terminal operators aren’t exactly in the clear now either, despite the fact that shipments are starting to roll out. The global LNG market has mirrored the oil market, as prices have cratered over the past year or so. At the beginning of 2015, Asian markets were paying as much as $15 per million British thermal units (mmBtu). Today, that price has dropped to under $7 per mmBtu. And when you do the math (domestic U.S. natural gas prices are trading around $2.40 per mmBtu, and it costs roughly $5 per mmBtu to liquify, transport, and then regassify natural gas), the price incentive for unloading American shale gas on the global LNG market is suddenly a lot more suspect. First, that is, we built the import terminals, and then decided we no longer needed to buy up LNG from abroad. Now we’ve constructed export terminals (which are roughly twice as expensive), and it seems that companies are going to have a hard time selling in today’s market.
U.S. LNG, then, doesn’t look like it will be flooding the global market anytime soon—but at least the trickle that’s just now starting to flow will give those Sabine Pass tugboats something to do.