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Hail Shale
American LNG Exports Make Their Debut

This may be one of the biggest pieces of news we’ll see this week: U.S. liquified natural gas (LNG) exports are hours away from being officially off the ground as the first shipments of the chilled hydrocarbon from a Louisiana export terminal prepare to make their way to buyers abroad tomorrow.

Just a decade ago America was busy constructing multi-billion dollar facilities to import LNG, but fracking changed the game by unleashing a flood of shale gas. That had companies scrambling to secure the (massive) necessary investments to start construction on LNG export terminals to take advantage of a market that seemed to be hungering for American supplies, especially in Asia where LNG was selling for quite a premium.

Last year wasn’t just a bad year for oil prices, though. Global LNG prices also dipped significantly and that Asian premium that many U.S. gas companies were banking on all but disappeared. But while the market might not be as favorable for U.S. exports as it once was, American LNG is still due to have a major impact. The FT reports:

The plunge in oil prices since the summer of 2014 has dragged down the value of LNG […]

Even so, US LNG exports are likely to have a significant impact, holding down energy costs for consumers in Europe, Latin America and Asia. They will also provide tough competition for anyone hoping to build rival LNG plants, such as the proposed projects in east Africa, the west of Canada, or Russia. By the end of the decade, the US is likely to be the world’s third-largest exporter of LNG, after Qatar and Australia.

Low prices mean that shareholders don’t have much to cheer about, but re-entry of the U.S. into energy export markets is a game-changing event. With the United States expected to become the world’s third largest LNG exporter by the end of the decade, the economics and the geopolitics of energy are clearly changing in ways that benefit the country. In just a few short years, the debate over American energy has shifted from one of scarcity to one of abundance, and for that, we have fracking to thank.

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