Energy

Mexico And Middle East Buying ‘Record Amounts’ Of US Natural Gas

The only liquid natural gas (LNG) export facility in the U.S. sold a record amount of gas to Mexico and the Middle East last month, according to data from the energy firm Platts Analytics.

Thanks to production gains attributable to hydraulic fracturing, or “fracking,” the Louisiana facility went from exporting 0.941 billion cubic meters of natural gas in November, to 1.476 billion cubic meters in January — an increase of almost 57 percent, according to the firm. The facility’s biggest customers are Mexico, the Middle East and India, which account for a 41 percent of its business.

Mexico relies on natural gas to generate 60 percent of its electricity. The Middle East is also using natural gas to meet soaring electricity demand. Countries like Kuwait and Dubai are some of the largest importers of U.S. gas.

Demand for LNG is also rising in Asia, with the first gas shipment from U.S. fracking arriving in Japan last month. Analysts accept that Asia will eventually account for the biggest market growth in demand for gas, largely because LNG prices have sharply risen in Japan, due to the suspension of the country’s nuclear power plants following the Fukushima disaster.

U.S. natural gas is also flowing into Europe, where LNG exports 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 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.

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 that exporting American LNG would provide huge environmental benefits as well. The report states that exporting LNG will help “address a variety of environmental concerns in the power‐generation sector.”

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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