The United States, and particularly the U.S. Gulf Coast, is the deepest and most liquid natural gas market in the world with a dense pipeline network and multiple supply sources, which makes most players globally in the LNG industry comfortable with buying volumes from the U.S. Gulf Coast.

A new market study by Wood Mackenzie on “U.S. LNG Exports: What Will Constrain Supply To Pacific Markets?” pointed to the current 15.4 billion cubic feet per day (bcf/d) of LNG export capacity from five brownfield and three Greenfield projects, noting that increasingly, the export licenses and other aspects of the approval processes are becoming politicized. 

While non-FTA export approvals are important, other factors could determine how much LNG will ultimately be exported from the U.S., the company emphasized. 

“For projects able to deliver in the short window before 2018, U.S. LNG exports into the Pacific, in particular, could feature payback periods of less than five years.  U.S. LNG projects able to move quickly enjoy significant first-mover advantages,” explained Noel Tomnay , head, global gas research, Wood Mackenzie.  “However, overall capacity build will likely be constrained by the speed at which liquefaction facilities can be developed to meet this window with their progress slowed by environmental and regulatory hurdles.”

“Given these hurdles US LNG exports are likely to be under 3.5 bcf/d in the timeframe to 2018, less than the 4.0 to 12 bcf/d envisaged by the Energy Information Administration in its rapid and slow ramp-up scenarios,” he continued. 

Wood Mackenzie stated that in the last four months, BG Group , Gas Natural Fenosa , Korea Gas Corp. and GAIL signed offtake agreements for 2.1 bcf/d of LNG from Cheniere Energy ’s proposed Sabine Pass liquefaction facility.  The Sabine Pass project is the only liquefaction facility so far approved by the U.S. Dept. of Energy (DOE) for exports to non-free-trade-agreement (non-FTA) countries.  However, the facility has yet to receive approval from the Federal Energy Regulatory Commission .

Higher-cost U.S. liquefaction developments in combination with an expectation of higher Henry Hub gas prices will likely make proximate Pacific supply options more competitive.  Consequently. Wood Mackenzie predicts that post-2018 incremental U.S. LNG exports into Asia are likely to be restricted by competition and buyer appetite rather than export approvals. 

According to Tomnay, “Export licenses for non-FTA countries could be determined by proposed projects’ place in the filing queue with those that submitted early better