A Sabine Pass, TX natural gas terminal could start exporting liquefied natural gas (LNG) by 2015, according to a press release distributed on May 20 by Cheniere Energy Partners, LP. The US Department of Energy (DOE) authorized Cheniere to retool their facility to export domestically-produced natural gas from the Sabine Pass terminal (in the form of LNG) to any country that has, or will soon have, the capacity to receive the LNG so long as trade with those countries is allowed.

Speculators believe that Cheniere is just the first in a line of what will likely become a race to join the LNG exporting business. The USA has about six LNG terminals, all of which incurred losses as natural gas commodities sank in recent months. The prospect of shipping natural gas to other countries where the market was previously unattainable due to lack of infrastructure within those countries is a welcome potential channel of revenue for the LNG terminals.

It is estimated that about 20% of our current surplus natural gas stores could be exported via terminals such as the Cheniere facility at Sabine Pass.  Natural gas futures for 2015 have risen substantially following the news, and analysts say this is only be the tip of what could be a very big iceberg.

“This concluding authorization by the DOE is a significant milestone for our liquefaction expansion project at Sabine Pass that will transform our terminal into the first bi-directional LNG processing facility capable of importing and exporting LNG.  Our terminal, designed with substantial operating flexibility and strategically located on the Gulf of Mexico, will provide customers the option to purchase or sell LNG from and to U.S. markets,” said Charif Souki, Cheniere Partners’ Chairman and CEO.

“This is possible only because of the unique depth of the markets in the Gulf Coast, both on the production and consumption side; with approximately 30 Bcf/d of fully integrated physical supply, pipeline infrastructure, storage, and market delivery capability. With the unprecedented growth in unconventional reserves, supply of natural gas continues to outpace demand dramatically.  There are currently an estimated 3,500 wells that have been drilled but not completed with the potential to continue to boost production.  The U.S. has an opportunity to become a significant supplier in the global energy markets.”

The developments allowing terminals in the U.S. to export LNG as well as import will likely impact consumers as well as the market as a whole.  There has previously been no market for exporting natural gas, but the Sabine Pass terminal could now dip into 20% of our natural gas surplus to meet newly realized demand for the fuel in Europe and Asia. Such a reduction in our domestic stores would affect market prices, which would also affect electricity prices, as the cost of power is based on the market price for natural gas.

Furthermore, the advent of opening the two-way trade routes for national gas would create a more defined ‘floor’ and ‘ceiling’ for natural gas prices. Prices won’t spike upward too much because we could import the fuel from the foreign markets, nor will they dip too low, because we can now export natural gas to hose markets. This synergy will likely bring a more stable balance to our energy markets.