The first shipment of liquefied natural gas (LNG) from U.S. fracking arrived in Japan Friday.
A tanker carried 70,000 tons of fracked LNG to a thermal natural gas power plant in Japan’s Niigata Prefecture. The gas had been loaded onto the tanker in Louisiana and is the first of a planned 700,000 tons of LNG imports to Japan this year.
“In 2016, most US LNG exports went to customers in the Western Hemisphere,” Richard D. Kauzlarich, former U.S. ambassador to the oil and gas rich countries of Azerbaijan and Bosnia, told The Daily Caller News Foundation. “[S]hipments to East Asia (especially Japan and China) will overtake destinations in this hemisphere in 2017. This analysis suggests that the natural long-term growth market for US LNG is in East Asia.”
LNG exports from the U.S. to Europe have sharply limited Russia’s ability to use state-controlled companies, such as Gazprom, as a political weapon against America’s allies in the region. Russia used interruptions in the natural gas supply in 2006, 2009 and 2015 to put political pressure on Eastern European countries like Ukraine, Poland and the Baltic states.
About half of Europe’s imported natural gas comes from Russia. American LNG exports directly compete against Russian gas, forcing the country to rethink how it treats American allies who can now have gas options.
“This is more proof of the positive impact that American energy production is having on the rest of the world,” Chris Warren, a spokesperson for the free market Institute for Energy Research, told TheDCNF. “The shale revolution has led to lower energy costs and less dependence on OPEC and Russia…thanks to American ingenuity and innovation, we’re once again an energy superpower and we can now export our resources to the rest of the world.”
LNG prices have sharply risen in Japan, due to the suspension of the country’s nuclear power plants following the Fukushima disaster. Natural gas is now flowing into the Asian market.
“[T]he enlarged Panama Canal has made an important difference in lowering transportation costs for US Gulf Coast-origin LNG exports to East Asia where US LNG must compete for market share with closer-by Australian LNG,” Kauzlarich continued. “It’s unclear whether the fastest growing East Asian market for imported LNG will be Japan or China.”
Kauzlarich thinks Japan will likely continue buying large amounts of fracked natural gas from the U.S., but that this amount may decline as the country reactivates shuttered nuclear power plans. The former ambassador thinks China will keep import vast amounts of LNG, but isn’t sure if that country will accept dependence on European energy.
“[T]he Chinese will want to diversify their sources of gas to include LNG from Australia and the Gulf states, and pipeline gas from Central Asia especially Turkmenistan,” Kauzlarich told TheDCNF. “Chinese gas demand may grow as public pressure to act on urban pollution caused mainly by continued reliance coal-fired electrical power generation.”
U.S. consumers would deal with minimal costs to export LNG and it would lead to huge economic benefits, according to a study published in December 2015 by the Department of Energy (DOE). The DOE found exporting American LNG would provide huge environmental benefits as well. The report states exporting LNG will help “address a variety of environmental concerns in the power‐generation sector.”
“The US market-driven example of shifting from coal to gas-fired electrical generation could be a good one for China to follow,” Kauzlarich concluded. “If they do increase their demand for natural gas including LNG, the US would be in a good position to sell more gas to China.”
Exporting natural gas is likely to be a growth industry, as global demand for natural gas is expected to be 50 percent higher by 2035 than it is now, according to the International Energy Agency. Demand for imports of LNG increased 27 percent in the United Kingdom last year alone.
The Obama administration was initially hesitant to approve LNG exports to Europe and Japan on environmental grounds, but reversed this position in late 2014 after the Russian annexation of Crimea. Europe was initially hesitant to rebuke Russia’s annexation of the Crimean peninsula because of the country’s control over natural gas pipelines. After five years of debate, the first shipments of American liquefied natural gas were shipped to Europe last January.
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