LNG export will help to raise gas prices in a few years

16 Sep 2013 by Jim Fickett.

Yesterday the Financial Times had a good summary of the current situation around export of liquified natural gas from the US.

The economic case for export is compelling at current prices:

Benchmark US gas is about $3.60 per million British thermal units for delivery next month … With cargoes of LNG being sold in China, Japan and South Korea for about $15 per mBTU, that is an attractive opportunity, even with the costs of liquefaction, transport and regasification adding about $6 per mBTU

For several years, nothing was happening in the permit process. Now, quite suddenly, many permits to construct LNG export facilities are being granted. Export capacity already approved would cover about 9% of the US gas market. That is enough to strongly influence prices.

Until May, the government had granted just one permit for worldwide exports of liquefied natural gas. It has approved three more in the past five months. …

A total of 6.4bn cubic feet per day of worldwide exports has been permitted, about 9 per cent of total US gas production this year.

Of course increasing exports will lower prices elsewhere and, at some point, will be self-limiting. Over the next few years, though, I expect this trend to be a positive one for US gas prices and, hence, US gas producer stocks.