U.S. liquefied natural gas (LNG) exports may surge in the next decade, establishing America as an “energy superpower,” former Obama special assistant Jason Bordoff told The New York Times Tuesday.
The American LNG market has several unique advantages that make it attractive to other countries’ needing a reliable and affordable source of gas.
“U.S. gas is linked to a hub price and has no destination restrictions,” Bordoff told TheNYT in an email. “That means more competition, liquidity and supply diversity, and that will make global gas markets more flexible, efficient and secure.”
The price of LNG in the U.S. is tied to the Henry Hub index. Henry Hub, a natural gas pipeline in Louisiana, is tied to most major gas markets in the U.S. and is used by the New York Mercantile Exchange to price futures contracts to sell a certain commodity at a predetermined time and price. The price can be locked in as far as 18 months in advance using the hub.
“Unlike coal or oil, which can be moved easily between ports, exporting natural gas has been a far trickier proposition, usually requiring pipelines between buyers and sellers,” Bordoff wrote. “Moreover, L.N.G. comes with unique energy security risks for gas-consuming countries, since suppliers can (and have) cut off gas flows.”
LNG from the U.S., though, can be shipped overseas after it is chilled into a stable liquid state in special port terminals. The process also allows U.S. LNG tankers versatility in delivering shipments, able to pick out growing “spot markets” to do business in, the Wall Street Journal reports.
“We have seen interest around the world in accessing Henry Hub indexed natural gas because it comes from a stable source, it is affordable, and U.S. LNG has the most flexible contract terms in the market,” Cheniere Energy chief executive Jack Fusco told WSJ. “The world is becoming more knowledgeable and comfortable with Henry Hub.”
Though the Trump administration has pushed an “ambitious deregulatory agenda” to secure American energy dominance, the U.S. expanding LNG market is due mostly to market forces, according to Bordoff.
“Those steps are unlikely to significantly change the outlook for U.S. oil, gas and coal production and exports,” Bordoff wrote. “Markets will matter far more than policy.”
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