Trump Administration’s Push for Gas Exports Faces Market Glut

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With supplies appearing bountiful, and other countries aiming to increase their own production, opposition has mostly abated, except in pockets of the East Coast and Pacific Northwest. There remains enthusiastic support along the gulf coasts of Louisiana and Texas, where there is substantial room for more growth.

For the Trump administration, the economic benefits of gas export infrastructure are paramount. Each natural gas export terminal can require an investment of $10 billion or more, produce thousands of construction jobs and consume millions of pounds of steel. Then there is the additional drilling and production of gas, which is then cooled to minus 260 degrees, condensing it to a liquid known as liquefied natural gas, or L.N.G., to be shipped on giant tankers to Asian, European and Latin American markets.

The recent expansion of the Panama Canal has quickened the route to growing markets in Japan, South Korea and elsewhere in Asia, making American gas more competitive.

“Exporting L.N.G. meets many objectives, including helping to address the trade imbalance,” said Daniel Yergin, the energy historian and vice chairman of IHS Markit, a consultancy. “This supports jobs, this supports investment in energy, this supports exports, a whole host of administration objectives.”

Once six facilities under construction or being expanded are completed over the next few years, the additional liquefied gas exports could amount to as much as $50 billion in annual revenue, depending on gas prices. Much of that would help balance the trade deficit with China, an administration objective.

Additionally, four big pipelines are being built this year to take more gas to Mexico, with at least two more slated to begin transporting gas by the end of 2018. With Mexico converting its power sector to natural gas from fuel oil, the country already imports more than 5 percent of United States gas production, which particularly helps Texas gas producers and pipeline companies.

To some extent, even American coal companies could benefit from more gas exports, because exporting natural gas tends to support its price. That is important because inexpensive gas has been the leading enemy of the shrinking coal industry, a head-to-head competitor.

Proponents in the State and Energy Departments have also long argued that more gas exports can provide better security to energy-hungry allies like Japan; lessen the dependence of Europe on Russia, which has been known to use gas as a political weapon; and speed up the replacement of coal with gas to curb climate change.

But construction has begun on so many terminals in recent years in Australia, Malaysia, Russia and the United States that supplies of liquefied gas shipped in tankers are expected to increase by nearly 50 percent over the next five years while global gas demand is increasing by less than 2 percent a year.

In the United States alone, where Cheniere Energy began major liquefied gas exports only last year, shipments are expected to jump to nearly six billion cubic feet a day from the current 1.5 billion cubic feet a day by the end of the decade as a cluster of projects are completed on the gulf coast.

Photo

Gary D. Cohn, right, director of the National Economic Council, and Treasury Secretary Steven Mnuchin at a briefing Wednesday on President Trump’s tax plan. Credit Stephen Crowley/The New York Times

The momentum for start-ups hit a wall over the last two years worldwide, and four United States projects approved in recent years have not yet begun construction. Companies have been content to complete the permitting process, seek financing and markets, and develop construction plans in the hope they can act fast in case the market turns around.

“The pace follows the market and not the wishes of the U.S. government,” said Nikos Tsafos, president and chief analyst at the consultancy Enalytica. “No one is really out there fishing for new projects right now.”

The gas business is cyclical, and proponents say it is only a matter of time before demand picks up. China and India are increasingly turning to gas to replace coal and improve the air quality of their cities. Gas demand for transport is growing in Iran, Pakistan and Argentina. Germany has largely given up on nuclear power, and it needs natural gas to replace some of the lost power.

Some L.N.G. executives say that the global demand for gas will grow as more export and import terminals are built and that the United States will continue to have a cost advantage over other major producers, including Qatar and Russia, because of the abundance of American gas production.

“It’s been demonstrated over the last two years that when you have low natural gas prices, demand increases much faster than what people think,” said Charif Souki, chairman of Tellurian, a Houston company developing a $15 billion L.N.G. export project south of Lake Charles, La.

“The Trump administration has discovered the power of natural gas,” Mr. Souki added. “Today, we are the top gas producer in the world, and in another three or four years, we’ll be one of the top two gas exporters in the world, right up there with Russia.”

That is certainly what the Trump administration is hoping for, although its policies may not have much of an immediate impact.

“We could be and should be the largest exporter of L.N.G. in the world,” Mr. Cohn said at a Washington conference in April. He said the first thing the administration would do was issue a permit for an export facility in the Northwest, a reference to the Jordan Cove L.N.G. terminal in the Oregon port of Coos Bay, where a Canadian company, Veresen, has proposed to build.

The Federal Energy Regulatory Commission last year denied a permit to the terminal as well as a pipeline to link it to production, saying the pipe would have “adverse effects on landowners.” There was also strong opposition from local environmental groups.

The commission can reconsider the issue, but not any time soon, because three of its five seats are vacant and the Senate has been known to take months to confirm commission nominations.

With additional fanfare, the Energy Department last week authorized Golden Pass Products, a partnership between Exxon Mobil and Qatar Petroleum, to export domestically produced gas from the Texas coast.

“This is not only good for our economy and American jobs but also assists other countries with their energy security,” said Energy Secretary Rick Perry, who championed the oil and gas industry as Texas governor.

The Golden Pass facility, originally designed for gas imports before the shale production boom created a glut, has largely remained dormant for the last six years. With an additional investment of $10 billion or so, the plant could become a force on international markets and export two billion cubic feet of gas a day, nearly 3 percent of current American gas production.

Golden Pass claims construction of the facility would mean 45,000 direct and indirect jobs over five years, and 3,800 direct and indirect permanent jobs.

The partnership released a one-line statement in response to the administration announcement: “Golden Pass Products is pleased to have achieved this important regulatory milestone as we continue to work to develop the export opportunity.”

But executives noted that the companies had not yet made a final decision on whether to go ahead with the investment.

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