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Freeport LNG and Shell are among the companies pursuing plans that involve spending billions of dollars to meet future energy needs of Asian countries, including Japan and South Korea.
An abundance of shale gas activity with a potential to boost extraction if improved technology arrives has positioned the US to become a future major exporter of LNG.
Realizing the potential, some companies are jumping at the opportunity to capitalize on the nation’s shale power by jumpstarting negotiations with companies in countries with known high energy needs today and anticipated for the future. Among these companies are Freeport LNG and Royal Dutch Shell.
Freeport LNG, a Gulf Coast-based LNG receiving and regasification terminal in Texas, recently announced it signed agreements with Japanese power companies Osaka Gas Co. Ltd. and Chubu Electric Power Co.
“It is a 20-year agreement with both Osaka and Chubu that would cover 100% capacity of the first train,” said Lisa Singleton, a spokeswoman for Freeport LNG. “That initial, three-train facility would be capable of liquefying 13 million tons per annum of gas.”
The company also revealed it is in advanced negotiations with Shell to become a major exporter of LNG. Shell and Freeport LNG hope to reach an agreement before year-end, Singleton said. However, it is too early to reveal targeted destinations of the LNG. “We’re in negotiations with them on that.”
Higher production and low gas prices encouraged Freeport LNG to act on exporting natural gas and make plans for the liquefaction and export project. The expanded terminal will make way for about 1.9 Bcf/d of LNG, according to Freeport LNG’s website.
“Fully built, the proposed expansion will require over [US] $4 billion in direct investment and will employ more than 1,800 workers during a two- to three-year construction period. In addition, the plant will create an estimated 20,000 to 25,000 jobs related to the production of the natural gas that will supply the liquefaction project. The increase in natural gas production is also estimated to provide between $4.3 billion to $6.2 billion in annual economic benefits to the US and will reduce the US foreign trade imbalance by approximately 1%.”
Subject to the Federal Energy Regulatory Commission approval, which Singleton said they hope to have by mid-2013, the first train is expected to start operating about 48 months from the state of construction. Each additional train will begin operating six to nine months after the previous train.
The US consumed more natural gas than it produced in 2010, importing 2.6 Tcf from other countries, according to the US Energy Information Administration (EIA) Energy Outlook 2012. However, considering domestic natural gas production is growing faster than consumption, predicted to be 0.4% annually from 2010 to 2035, the US is expected to be a natural gas exporter by 2022. The amount of natural gas exports is projected to reach 1.4 Tcf by 2035.
Making up the bulk of the resources will be shale gas, accounting for 49% of total US natural gas production in 2035, followed by tight gas, coalbed methane deposits, and offshore fields, according to the EIA. The shale gas percentage is more than double its 23% share in 2010. Estimated shale gas resources, proved and unproved, totaled 542 Tcf.
Global energy consumption could increase by 47% from 2010 to 2035, with most of the consumption in Asia increasing 91% by 2035, according to the EIA. Figures from the agency showed Asia consumed 39 quadrillion Btu of energy in 2012, most of which – 21.1 – was used in Japan. Asia’s numbers are expected to reach 46.7 quadrillion Btu, of which 32.9% would be natural gas, by 2035. Japan’s energy consumption is predicted to rise to 23.8 quadrillion Btu.
A recent GlobalData report noted Japan, where demand for natural gas is high already, could run into supply constraints in the next few years. The country, among the world’s most populated, ranks first in LNG imports, followed by South Korea. Together, imports from the two countries were estimated at about 47% of global LNG imports in 2011.
Growing demand from Asian countries also prompted Shell to join Korea Gas Corp., Mitsubishi Corp., and PetroChina Co. Ltd. in developing a proposed LNG export facility in western Canada. Initially, LNG Canada will have two trains, with capacity to each produce 6 million tons of LNG annually.
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