Obama’s Indecisiveness is Killing a Fledgling Industry
President Obama’s indecisiveness regarding the energy industry is becoming a serious problem.
Not only has he continued to waver on the question of the Keystone XL pipeline, he’s shown a troubling amount of lethargy with respect to another important issue: natural gas exports.
“I’ve got to make an executive decision broadly about whether or not we export liquefied natural gas at all,” Obama said during a trip to Costa Rica.
To a certain extent, you can see where Obama is coming from. There was a question about whether or not U.S. gas exports would increase the cost of domestic energy, as well as the input costs of chemical companies.
But that question was answered in December, when a report commissioned by the Energy Department showed that wouldn’t be the case. To the contrary, the report found that natural gas exports would have a positive effect on the U.S. economy.
Yet, 21 LNG export projects are still waiting to get the green light from the Energy Department.
Indeed, only one project – Cheniere Energy’s (LNG) Sabine Pass terminal – has been approved. And it’s generated so much interest that the company is already looking to double the plant’s size.
Still, the government does nothing, opting instead to fall behind in the race…
While the United States drags its feet on approving natural gas exports, competitors are racing ahead, raking in billions of dollars in revenue and strengthening ties with trade partners.
Qatar is the undisputed king when it comes to liquefied natural gas (LNG) exports. The emirate ships out nearly 80 million metric tons of the fuel each year, accounting for about 31% of the global market.
But competitors are quickly emerging.
In fact, Australia could overtake Qatar to become the world’s largest LNG exporter in just seven years. The country exported a record 21.8 million metric tons of LNG last year, earning $14 billion in trade revenue.
Canada is on the hunt, as well.
Ten multi-billion LNG export facilities have been proposed in British Columbia. And three have already received permission to ship the fuel to Asia from Canada’s Pacific Coast. Together, those three projects will ship more than 4.66 billion cubic feet of natural gas to hungry Asian markets each day – more than double the 2.2 billion cubic feet permitted in the United States.
Furthermore, Canada’s first LNG export facility is set to open for business in 2015, two years ahead of Cheniere’s. And while Cheniere’s plant is located on the Gulf of Mexico, Canada’s terminals are on the West Coast, giving them the advantage of proximity to the Asian markets.
Indeed, Asia is expected to dominate the market for LNG imports for decades to come. The region accounted for 71% of global LNG demand at the end of 2012, with imports of 210 billion cubic meters. That’s up from 64% in 2011.
So if the United States is going to compete, the government needs to act… and fast.
Competitors Cashing In
Dominion Resources (D) expects to be the next company to secure an LNG export license, but not until later this year. And as it waits, other energy companies are moving forward with projects in more welcoming environments.
Exxon Mobil (XOM) and BHP Billiton (BHP) are planning to build the world’s largest floating LNG processing and export plant off the coast of Australia. Capable of processing 7 million metric tons per year, it alone could boost Australia’s LNG production by 30%.
Meanwhile, Chevron (CVX) has invested $85 billion in Australian LNG export terminals, and plans to start shipping the fuel from Angola by July. The company also has a 50% stake in the Kitimat LNG project in Canada.
“The U.S. must act very soon – or the door is going to close and our country will have missed a major economic opportunity,” said Dominion Chief Executive Officer Thomas Farrell.
Dominion is looking to convert its Cove Point terminal on the Chesapeake Bay to an LNG export facility with a daily send-out capacity of 1.8 billion cubic feet.
The company has pitched its plan to the government, saying the project would contribute about $1 billion annually in federal, state and local government revenue.
It also said an average of 750 construction workers would be employed during the three-plus years of construction. And the benefits to the energy industry as a whole would support another 14,600 jobs once exports begin.
Furthermore, pipelines connecting the Cove Point terminal to Pennsylvania’s Marcellus Shale gas field are already in place. So by giving Dominion the green light to go ahead with exports, the government could also stimulate drilling in Pennsylvania, where gas production has stagnated due to oversupply.
Sadly, that hasn’t been enough to hasten government approval. And the man responsible – President Obama – has given no indication that his administration is poised to act.
And “the chase” continues,